STAND. COM. REP. NO. 478
Honolulu, Hawaii
RE: S.B. No. 1082
S.D. 1
Honorable Ronald D. Kouchi
President of the Senate
Thirty-First State Legislature
Regular Session of 2021
State of Hawaii
Sir:
Your Committee on Labor, Culture and the Arts, to which was referred S.B. No. 1082 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:
(1) Clarify the definition of "compensation" for the purpose of calculating retirement benefits for public employees; and
(2) Exclude recurring differentials from the definition of "base pay" and shortage differentials from the definition of "compensation", respectively.
Your Committee received testimony in support of this measure from the Employees' Retirement System (ERS). Your Committee received testimony in opposition to this measure from the Hawaii Government Employees Association, AFSCME Local 152, AFL CIO; Hawaii State Teachers Association; and one individual. Your Committee received comments on this measure from the City and County of Honolulu Department of Budget and Fiscal Services, City and County of Honolulu Department of Human Resources, and City and County of Honolulu Department of Information Technology.
Your Committee finds that ERS retirement benefits are calculated based on a formula which includes the employee's average final compensation; however, the eight separate employers who use the ERS are currently reporting their employees' payroll information to the system using inconsistent discretionary definitions of "base compensation". This inconsistency, in addition to creating inequality among public employees, also subjects the ERS to the risk of losing its tax-exempt status as a qualified pension plan. Therefore, your Committee finds that this measure is necessary to ensure that retirement benefits are computed fairly and equitably for all public employees, facilitate employer reporting of compensation on a consistent and timely basis, and eliminate risk to ERS's tax-exempt status.
Your Committee also finds that some employers who fill hard-to-fill positions by increasing the salary using shortage differential choose to continue paying the differential for the duration of the employee's career instead of reclassifying the position's salary to an appropriate market rate. Your Committee finds that excluding recurring differentials, including shortage differentials used in such manner, from the definitions of "base pay" and "compensation" will have an unintended detrimental effect on many employees.
Accordingly, your Committee has amended this measure by:
(2) Allowing "recurring differentials" to remain as part of "base pay" in section 88-21, Hawaii Revised Statutes;
(3) Allowing "shortage differentials" to remain as part of "compensation" in section 88-21.5(b), Hawaii Revised Statutes; and
(4) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.
As affirmed by the record of votes of the members of your Committee on Labor, Culture and the Arts that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1082, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1082, S.D. 1, and be referred to your Committees on Judiciary and Ways and Means.
Respectfully submitted on behalf of the members of the Committee on Labor, Culture and the Arts,
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________________________________ BRIAN T. TANIGUCHI, Chair |
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