HOUSE OF REPRESENTATIVES

H.B. NO.

2855

TWENTY-FIFTH LEGISLATURE, 2010

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO THE EMPLOYEES' RETIREMENT SYSTEM.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  Purpose.  The purpose of this Act is to require the board of trustees of the employees' retirement system to study and recommend legislation to amortize the unfunded actuarial accrued liability of the fund over thirty years.

     The legislature finds that the unfunded actuarial accrued liability exposure of the fund is substantial.  According to the Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2007, the unfunded actuarial accrued liability of the fund was $5,100,000,000 on June 30, 2007.

     The legislature further finds that this data signifies an obvious and immediate need to develop and then implement solutions to amortize the unfunded actuarial accrued liability so that future taxpayers are not faced with an onerous, unaffordable burden.

     SECTION 2.  Definitions.  (a)  The definitions under section 88-21, Hawaii Revised Statutes, shall apply for the purposes of this Act.
     (b)  In addition:

     "Amortization plan" means a plan to fully amortize the unfunded actuarial accrued liability of the system over a thirty-year period commencing July 1, 2012.

     "New employee" means a permanent, full-time employee of the State or county who first:

     (1)  Enters full-time service with the State or county after June 30, 2011; or

     (2)  Entered state or county service before July 1, 2011, but never was a member of the system.

     "Permanent, full-time employee" means an employee whose term of employment is year-round and workweek is at least forty hours a week.

     "Public employer" means the State or a county.

     "Unfunded actuarial accrued liability of the system" means the excess of the actuarial accrued liability of the fund over the actuarial value of assets of the system, as calculated on July 1, 2010.

     SECTION 3.  Amortization of unfunded actuarial accrued liability; study and recommendation by board.  (a)  From the effective date of this Act, the board of trustees of the employees' retirement system shall conduct a study for the purpose of establishing a plan to fully amortize the unfunded actuarial accrued liability of the system over a thirty-year period commencing July 1, 2012.

     (b)  By January 1, 2012, the board shall submit to the legislature the proposed amortization plan required under subsection (a), accompanied by any proposed legislation necessary to implement the proposed plan.

     (c)  The proposed amortization plan shall conform to the following general principles:

     (1)  No vested right of an employee or beneficiary shall be impaired;

     (2)  The tax status under federal law of the system, contributions, and employees' benefits shall not be jeopardized;

     (3)  The annual required contribution for each employee shall include:

         (A)  The normal cost of the retirement plan in which the employee is a member; and

         (B)  An appropriate portion of the amortization cost of the unfunded actuarial accrued liability over the thirty-year period;

     (4)  The cost of amortizing the unfunded actuarial accrued liability shall be shared by public employers and employees; provided that any cost of amortizing the unfunded actuarial accrued liability that is a result of the diversion of the excess investment earnings of the employees' retirement system shall be borne solely by the employers; and

     (5)  All permanent, full-time employees shall be members of the system.  The proposed plan also may recommend membership for other employees.

     (c)  In formulating the proposed amortization plan, the board shall not be required to maintain the same benefits, contributions, and other provisions for all employees.  The board may recommend lesser benefits, greater contributions, or other less advantageous provisions for new employees than those for current employees.

     SECTION 4.  Proposed legislation to implement proposed amortization plan; consideration by legislature.  (a)  During the regular session of 2012, the speaker of the house of representatives and the president of the senate shall introduce a bill in each of their respective chambers setting forth the proposed legislation submitted by the board.  Each bill shall be subject to the legislative process in the respective chambers.

     (b)  Nothing in this section shall be construed as requiring the legislature to enact a bill in the form submitted or enact any bill if choosing not to do so.

     (c)  If the board of trustees fails to submit proposed legislation to the legislature as required under section 3, the failure shall not prevent the legislature from enacting legislation establishing its own version of an amortization plan.

     SECTION 5.  Effective date.  This Act shall take effect upon its approval.



 

 

Report Title:

Employees Retirement System; Unfunded Actuarial Accrued Liability Amortization Plan

 

Description:

Requires the board of trustees of the employees' retirement system to study and recommend a plan to fully amortize the unfunded actuarial accrued liability of the system over a 30-year period. (HB2855 HD1)

 

 

 

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