Report Title:

ERS; hybrid membership and hardship withdrawals

Description:

Excludes from membership in the hybrid plan members of the employees' retirement system who received in-service refunds of pension contributions made under section 414(h)(2) of the IRC. Repeals the provision for hardship withdrawal of employees' retirement system contributions. (HB2311 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

2311

TWENTY-THIRD LEGISLATURE, 2006

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. The employees' retirement system of the State of Hawaii is intended to be a tax-qualified retirement plan under section 401(a) of the Internal Revenue Code of 1986, as amended (Code). Section 414(h)(2) of the Code provides for favorable tax treatment for employee contributions "picked up" (made by the employer on behalf of the employee) to a tax-qualified retirement plan established by a state or county or by an agency or instrumentality of a state or county. However, the tax-qualified status of a government retirement plan may be jeopardized:

(1) If the plan allows members to receive a refund of the contributions made under section 414(h)(2) of the Code while the member is employed by the government; or

(2) If a member who received a refund of contributions made under section 414(h)(2) of the Code while the member was still employed by the government is allowed to have additional contributions made on behalf of the member under section 414(h)(2).

The purpose of this Act is to repeal the portions of chapter 88, Hawaii Revised Statutes, that allow members of the employees' retirement system:

(1) To receive a refund of contributions made under section 414(h)(2) of the Code while the member is still employed by the State or a county; or

(2) Who received a refund of contributions made under section 414(h)(2) of the Code while still employed by the State or a county to have additional contributions made on behalf of the member under section 414(h)(2).

SECTION 2. Section 88-271, Hawaii Revised Statutes, is amended by amending subsections (d) and (e) to read as follows:

"(d) [Any class A or class H member who elects and is approved to withdraw the member's contributions may become a class C member in accordance with section 88-46.5. Upon approval of the election:

(1) All rights as a class A or class H member shall be extinguished;

(2) The member's accumulated contributions shall be refunded; and

(3) The member shall not be required to make further contributions to the system.

This election shall be irrevocable.] The election by any class A or class B member to become a class C member pursuant to section 88-46.5 in the form in which it existed at any time prior to July 1, 2006, shall be irrevocable upon refund of the member's accumulated contributions.

(e) The system shall provide information explaining the effects of any election made under subsection (a)[,] or (c)[, or (d)]."

SECTION 3. Section 88-321, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The following members may not elect to become a class H member under subsection (a):

(1) Judges, elected officials, and legislative officers;

(2) Investigators of the department of the attorney general, narcotics enforcement investigators, water safety officers not making the election under section 88-271, prosecuting attorney investigators not making the election under section 88-271, corrections officers not making the election under section 88-271, and public safety investigations staff investigators;

(3) Police officers and firefighters;

(4) All employees who were members on July 1, 1957, who elected not to be covered by the Social Security Act; [and]

(5) Former class A, B, or C retirants[.]; and

(6) Any former class A or class B member who received a refund of contributions picked up and paid by the member's employer pursuant to section 88-46(b), unless the refund was made pursuant to section 88-96 or 88-271(b), including any class C member whose contributions were refunded to the member pursuant to section 88-46.5 in the form in which it existed at any time prior to July 1, 2006."

SECTION 4. Section 88-46.5, Hawaii Revised Statutes, is repealed.

["§88-46.5 Withdrawal of contributions and transfer to the noncontributory plan. (a) Notwithstanding any other provisions of this chapter to the contrary, a member who is in a position covered by Title II of the Social Security Act may apply to the system for a one-time withdrawal of the member's contributions in the event of economic hardship.

(b) Upon approval of the member's election, all rights as a class A or class H member shall be extinguished and the member shall:

(1) Become a class C member;

(2) Be refunded the member's contributions; and

(3) Not be required to make any further contributions.

(c) The system shall administer this section and shall:

(1) Prescribe the verification needed for the withdrawal election authorized under this section;

(2) Provide the member with information explaining the effects of the election;

(3) Review the facts and make a case-by-case determination; and

(4) Notify the member in writing of the approval of the withdrawal or the disapproval and the reasons for the disapproval.

(d) For the purposes of this section, "economic hardship" means a financial hardship resulting from any of the following conditions that cannot be satisfied by other resources, including:

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

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

(3) Any other extraordinary and unforeseeable circumstance arising as a result of events beyond the member's control."]

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2006, except that sections 2 and 3 shall take effect retroactive to July 1, 2004.