ERS; Class A

Upon application to the ERS board, allows a class A member to
withdraw for one time only, the member's contributions (or a
portion thereof) for financial hardship.  Defines financial
hardship.  Requires board to set implementing rules.

THE SENATE                              S.B. NO.           1622
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Findings and purpose.  The legislature finds
 2 that the current economic crisis in Hawaii may cause job losses
 3 which may impact families with one or more adults working in the
 4 public sector.  Under the current retirement system for public
 5 employees, there is one group of employees who entered service
 6 after 1984 who do not make any contributions to their retirement
 7 fund and are generally referred to as class C, or the non-
 8 contributory group.  On the other hand, there is a group of
 9 members who are referred to as class A and class B, who belong to
10 the contributory plan.  Most members of the contributory plans
11 contribute seven and eight-tenths per cent of the member's
12 compensation towards the member's retirement fund, while certain
13 other employees such as police officers, firefighters, and
14 various investigators contribute twelve and two-tenths per cent.
15 There are different benefits and eligibility guidelines for
16 retirement for members who belong to the contributory as opposed
17 to the non-contributory classes.  In general, a contributory
18 class A member has less take-home pay if compared to the class C
19 member.  The legislature is concerned about the ability of a

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                                     S.B. NO.           1622

 1 family in which a member is a public servant who is a class A
 2 member, who may need some extra funds to tide the family over if
 3 there is financial hardship, for example when a second paycheck
 4 is lost due to restructuring or reductions in force.  After all,
 5 there are many families who live from paycheck to paycheck in
 6 Hawaii and who have little savings to fall back on.  In the
 7 meantime, however, the contributory member's retirement funds may
 8 contain funds that could be used by that member to pay for
 9 unusually high medical expenses, higher education costs, or even
10 the cost of elder care.  The purpose of this Act is to permit, on
11 a one-time basis, a contributory member to withdraw under certain
12 conditions of financial hardship, part or all of that member's
13 contributions.
14      SECTION 2.  Chapter 88, Hawaii Revised Statutes, is amended
15 by adding a new section to part II, C, to be appropriately
16 designated and to read as follows:
17      "88-    Withdrawal of funds from the contributory plan;
18 when allowed.  (a)  Notwithstanding other provisions of this
19 chapter, a member may apply to the board pursuant to rules, for a
20 one-time withdrawal of funds from the member's contributions in
21 the event of economic hardship.
22      (b)  For purposes of this section "economic hardship" means
23 financial hardship due to medical costs from injury or a lengthy

Page 3                                                     
                                     S.B. NO.           1622

 1 illness of a member or the member's child or spouse; elder care
 2 for a member's parent or spouse's parent; or for full-time
 3 college or university costs for a member's child.  Other examples
 4 of hardship shall include:
 5      (1)  Inability to purchase automobile, life, homeowner's,
 6           fire hazard, hurricane, and flood insurances; land
 7           taxes;
 8      (2)  Frequent delinguencies on mortgage or rent of home
 9           (Foreclosure notice has been given);
10      (3)  Untimely payment of utilities;
11      (4)  Collection notices for medical or lab services
12           rendered;
13      (5)  Partial payments for income taxes; tax services
14      (6)  No savings to fall back on;
15      (7)  Difficulty to purchase food, clothing, automobile
16           expenses, school expenses such as lunch moneys, bus
17           transporation; school supplies, uniforms, school dues;
18      (8)  Not able to make any type of loan because of mortgage
19           or rent and other personal loan delinquencies;
20      (9)  Only one vehicle for household; not able to  make a
21           loan for second vehicle due to loan deliquencies and
22           mortgage or rent payments;
23     (10)  Inability to make up-front payments for special medical

Page 4                                                     
                                     S.B. NO.           1622

 1           or dental or lab services for children and selves as
 2           parents.
 3      (c)  The board, in developing its rules to implement this
 4 section, among other factors, shall describe:
 5      (1)  The kinds of verification needed in its application
 6           forms for withdrawal of funds for hardship cases;
 7      (2)  Whether a member shall be vested before filing an
 8           application under this section;
 9      (3)  The actuarial impact the withdrawal shall have on the
10           member's future retirement benefits; and
11      (4)  Whether a spouse shall also be required to approve the
12           withdrawal of funds for hardship."
13      SECTION 3.  New statutory material is underscored.
14      SECTION 4.  This Act shall take effect upon its approval.
16                              INTRODUCED BY:______________________