STAND. COM. REP. NO. 1341-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2369
                                     S.D. 1
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Labor and Public Employment and Finance,
to which was referred S.B. No. 2369, S.D. 1, entitled: 

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

beg leave to report as follows:

     The purpose of this bill is to permit, on a one-time basis,
a class A contributory member of the Employees' Retirement System
(ERS) to withdraw part or all of that member's contributions,
under certain conditions of financial hardship.

     One individual testified in support of this bill.  ERS
offered comments on this bill.

     Contributory members have a percentage of their salaries
deducted for their retirement and, as a result, have less take-
home pay available in times of financial hardship.  Your
Committees find that public employees suffering from financial
hardship would benefit from the option to withdraw their
retirement contributions while still in active service.

     At the same time, your Committees recognize the following
concerns of the ERS that this bill, as received:

     (1)  Contains no provisions for repayment and the interest
          rate to be charged on the withdrawn contributions;


 
 
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     (2)  Does not address penalties that may be imposed for the
          premature distribution of a member's contributions
          before retirement;

     (3)  Needs a less liberal definition of "economic hardship"
          because it would allow almost anyone to qualify for
          withdrawal.  Easy access to these funds may be
          detrimental to the long-term interest of the member;
          and

     (4)  Needs to clarify how much service credits should be
          forfeited if the member can only repay a portion of the
          withdrawn funds, what constitutes spousal approval, and
          other factors.

     Your Committees have amended this bill by deleting its
contents and inserting provisions addressing concerns raised by
ERS.  As amended this bill:

     (1)  Requires the member to withdraw all or none of the
          member's contributions;

     (2)  Defines "economic hardship" to mean financial hardship
          resulting from the following conditions that cannot be
          satisfied by other resources, including:

          (A)  A sudden and unexpected illness or accident of the
               member or the member's dependent;

          (B)  The loss of the member's property due to casualty;
               or 

          (C)  Any other extraordinary and unforeseeable
               circumstances arising as a result of events beyond
               the member's control;

     (3)  Requires that a contributory member who makes the
          election to withdraw funds to permanently change the
          member's status to class C (noncontributory); and

     (4)  Establishes rules and procedures for administering the
          withdrawals.

     As affirmed by the records of votes of the members of your
Committees on Labor and Public Employment and Finance that are
attached to this report, your Committees are in accord with the
intent and purpose of S.B. No. 2369, S.D. 1, as amended herein,
and recommend that it pass Second Reading in the form attached

 
                                 STAND. COM. REP. NO. 1341-00
                                 Page 3

 
hereto as S.B. No. 2369, S.D. 1, H.D. 1, and be placed on the
calendar for Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Labor and Public
                                   Employment and Finance,

                                   
                                   
                                   
                                   
______________________________     ______________________________
DWIGHT Y. TAKAMINE, Chair          TERRY NUI YOSHINAGA, Chair