STAND. COM. REP. NO. 970

Honolulu, Hawaii

RE:    H.B. No. 1036

       H.D. 1

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committees on Public Safety, Government Operations, and Military Affairs and Judiciary and Labor, to which was referred H.B. No. 1036, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO FEDERAL TAX QUALIFICATION REQUIREMENTS FOR THE EMPLOYEES' RETIREMENT SYSTEM,"

beg leave to report as follows:

     The purpose and intent of this measure is to protect the status of the Employees' Retirement System (ERS) as a tax‑qualified retirement plan under section 401(a) of the Internal Revenue Code by amending Hawaii's ERS law to include provisions required by federal law.   

     Your Committees received testimony in support of this measure from The Oahu Veterans Council.  Your Committees received comments on this measure from the Board of Trustees of the Employees' Retirement System.

     Your Committees find that this measure is necessary to conform state law to federal requirements.  According to testimony of the Board of Trustees of the ERS, this measure is needed for the ERS to maintain its tax-exempt status.  The loss of its tax‑exempt status would be extremely detrimental to the ERS and its members - the pre-tax benefit on members' contributions would be eliminated and ERS members would be required to pay federal income taxes annually on the value or increase in value of their accounts without receiving distributions from the ERS.  These taxes could amount to thousands of dollars from members, who would have to find monies outside of their ERS pension accounts to pay for those taxes.

     Your Committees have amended this measure by:

     (1)  Adding civil union partner references where appropriate; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Public Safety, Government Operations, and Military Affairs and Judiciary and Labor that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1036, H.D. 1, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 1036, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Public Safety, Government Operations, and Military Affairs and Judiciary and Labor,

____________________________ CLAYTON HEE, Chair

____________________________ WILL ESPERO, Chair