REPORT TITLE:
ERS; Class A


DESCRIPTION:
Enable the ERS board to establish a loan program for members
facing financial hardship.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE EMPLOYEES' RETIREMENT SYSTEM.



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

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

 
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 1 in need of some extra funds if there is financial hardship, for
 
 2 example when a second paycheck is lost due to restructuring or
 
 3 reductions in force.  After all, there are many families who live
 
 4 from paycheck to paycheck in Hawaii and who have little savings
 
 5 to fall back on.
 
 6      The purpose of this Act is to enable the employees
 
 7 retirement system to establish a loan program for members facing
 
 8 financial hardship.
 
 9      SECTION 2.  Chapter 88, Hawaii Revised Statutes, is amended
 
10 by adding a new section to part II, A, to be appropriately
 
11 designated and to read as follows:
 
12      "88-    Financial hardship loan program; established.  (a)
 
13 The board shall establish a financial hardship loan program for
 
14 the benefit of its members who, due to a financial hardship, find
 
15 it necessary to obtain supplemental funds for a reason specified
 
16 in this section.  The board shall adopt rules in accordance with
 
17 chapter 91 to effectuate the purposes of this section.
 
18      (b)  For purposes of this section, "economic hardship" means
 
19 financial hardship due to medical costs from injury or a lengthy
 
20 illness of a member or the member's child or spouse; elder care
 
21 for a member's parent or spouse's parent; or for full-time
 
22 college or university costs for a member's child.  Other examples
 
23 of hardship shall include:
 

 
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 1      (1)  Inability to purchase automobile, life, homeowner's,
 
 2           fire hazard, hurricane, and flood insurances; land
 
 3           taxes;
 
 4      (2)  Frequent delinquencies on mortgage or rent of home
 
 5           (foreclosure notice has been given);
 
 6      (3)  Untimely payment of utilities;
 
 7      (4)  Collection notices for medical or lab services
 
 8           rendered;
 
 9      (5)  Delinquently in payments for income taxes; tax
 
10           services;
 
11      (6)  No savings to fall back on;
 
12      (7)  Difficulty in paying for food, clothing, automobile
 
13           expenses, and school expenses such as lunch, bus
 
14           transportation, school supplies, uniforms, school dues;
 
15      (8)  Inability to obtain any type of loan because of
 
16           mortgage or rent and other personal loan delinquencies;
 
17      (9)  Only one vehicle for household; inability to obtain a
 
18           loan for a second vehicle due to loan delinquencies and
 
19           mortgage or rent payments; and
 
20     (10)  Inability to make up-front payments for special medical
 
21           or dental or lab services for children and selves as
 
22           parents.
 
23      (c)  The board, in developing its rules to implement this
 

 
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 1 section, among other factors, shall include:
 
 2      (1)  The kinds of verification needed in its application
 
 3           forms for loans for hardship cases;
 
 4      (2)  Repayment schedules and the interest rate or rates, if
 
 5           any, the system will impose on the repayment of loans;
 
 6      (3)  Whether a member shall be vested before filing an
 
 7           application under this section;
 
 8      (4)  Whether to restrict eligibility to receive a loan under
 
 9           this section to certain membership classes;
 
10      (5)  Collateral and ability to repay loan requirements;
 
11      (6)  The actuarial impact, if any, the loan shall have on
 
12           the member's future retirement benefits; and
 
13      (7)  Whether a spouse shall also be required to approve the
 
14           loaning of funds for hardship."
 
15      SECTION 3.  New statutory material is underscored.
 
16      SECTION 4.  This Act shall take effect upon its approval.