Report Title:

Employees' Retirement System

Description:

Allows contributory members of the ERS to withdraw, on a one-time basis, part or all of the member's contributions under certain conditions of economic hardship.

HOUSE OF REPRESENTATIVES

H.B. NO.

989

TWENTY-SECOND LEGISLATURE, 2003

 

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. Under the current retirement system for public employees, there is a class of employees that does not make any contribution toward their retirement. They are employees who entered service after 1984 and are generally referred to as class C or non-contributory members. The rest of the employees contribute toward their retirement and are classified as class A and class B members.

Most members of the contributory plans contribute seven and eight-tenths per cent of their compensation toward their retirement, while certain specified employees, such as police officers and firefighters, contribute twelve and two-tenths per cent. There are different benefit and eligibility guidelines for retirement for members who belong to the contributory plans. In general, a contributory member has less take-home pay than a noncontributory member.

The legislature has concerns about the financial stability of a family when a member of the family is a contributory member and is unable to draw from retirement funds to tide the family over in times of financial hardship. Families who live from paycheck to paycheck with little savings to fall back on will find financial relief if they can tap their retirement funds to pay for unusually high medical expenses, higher education costs, and the high cost of elder care.

The purpose of this Act is to permit, on a one-time basis, a contributory member of the employees' retirement system to withdraw, under certain conditions of economic hardship, part or all of that member's contributions.

SECTION 2. Chapter 88, Hawaii Revised Statutes, is amended by adding a new section to part II, C, to be appropriately designated and to read as follows:

"§88- One-time withdrawal of funds by contributory members; when allowed. (a) Notwithstanding any provision of this chapter to the contrary, a class A or class B member, upon application to the board, may be allowed a one-time withdrawal of all or a portion of funds from the member's contributions in the event of economic hardship.

(b) The board shall adopt rules pursuant to chapter 91 to implement this section. Among other factors, the rules shall:

(1) Determine the conditions when a member may withdraw funds for economic hardship, including:

(A) Whether a member shall be vested before filing an application for withdrawal;

(B) What kind of actuarial impact the withdrawal will have on the member's future retirement benefits; and

(C) Whether a spouse will be required to approve the withdrawal of funds; and

(2) Establish the kinds of verification required for withdrawal of funds for economic hardship.

(c) As used in this section, "economic hardship" means financial hardship resulting from:

(1) Medical costs from injury or a lengthy illness of a member, the member's child, the member's spouse, or the member's reciprocal beneficiary;

(2) Elder care for a member's parent, the parent of a member's spouse, or the parent of a member's reciprocal beneficiary; or

(3) Full-time college or university costs for a member's child."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________