STAND. COM. REP. NO. 2300

Honolulu, Hawaii

RE:    S.B. No. 2749

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2012

State of Hawaii

Sir:

     Your Committee on Judiciary and Labor, to which was referred S.B. No. 2749 entitled:

"A BILL FOR AN ACT RELATING TO THE EMPLOYEES' RETIREMENT SYSTEM,"

begs leave to report as follows:

     The purpose and intent of this measure is to harmonize the service retirement, ordinary disability retirement, and ordinary death benefits for members of the Employees' Retirement System who become members after June 30, 2012, and restores age and service requirements for retirement parity for current members who become judges after June 30, 2012, and other contributory plan members.  Specifically, this measure:

     (1)  Restores parity between judges and other contributory plan members with respect to age and service requirements for retirement;

     (2)  Deletes water safety officers from the list of individuals who join the Employees' Retirement System as contributory members after June 30, 2012, as this category no longer applies because officers becoming members after June 30, 2012, are Hybrid Plan members;

     (3)  Applies the same benefit multiplier for service retirement benefits and ordinary disability benefits for Hybrid Plan members who become members of the Employees' Retirement System after June 30, 2012;

     (4)  Makes the service requirement for payment of the Hybrid Plan hypothetical account balance as an ordinary death benefit for an individual who becomes a member after June 30, 2012, the same as the service requirement for an inter vivos withdrawal by the member after the member has terminated service; and

     (5)  Makes various housekeeping amendments to correct typographical errors and avoid confusion.

     Your Committee received testimony in support of this measure from the Department of Budget and Finance and the Employees' Retirement System.

     Your Committee finds that this measure makes several amendments to the pension and retirement laws in order to clarify benefit changes made under Act 163, Session Laws of Hawaii 2011.  The purpose of Act 163 was to make various revisions to the Employees' Retirement System in order to reduce the system's unfunded liability.  These amendments harmonize the service requirements and ordinary death benefits for individuals who become members of the Employees' Retirement System after June 30, 2012, as a result of Act 163.

     In particular, your Committee notes that prior to the enactment of Act 163, Session Laws of Hawaii 2011, the age and service requirements for retirement for judges were the same as for other contributory plan members who became members of the Employees' Retirement System at the same time.  However, Act 163 establishes more stringent age and service requirements for retirement by individuals who become members after June 30, 2012, and for current system members who become judges after June 30, 2012.  As a result, current system members who become judges after June 30, 2012, are subject to more stringent age and service requirements than other contributory plan members of the system at the same time.  In light of the reported $8,164,000,000 Employees' Retirement System's unfunded liability as of June 30, 2011, your Committee finds that "grandfathering" in existing system members who become judges after June 30, 2012, so that the more stringent service and age requirements do not apply to these members is counterproductive to the reduction of the unfunded liability.

     As such, your Committee has amended this measure by:

     (1)  Deleting the provisions that restore parity between judges and other contributory plan members with respect to age and service requirements for retirements;

     (2)  Changing the effective date to July 1, 2012; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity and style.

     As affirmed by the record of votes of the members of your Committee on Judiciary and Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2749, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2749, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Judiciary and Labor,

____________________________

CLAYTON HEE, Chair