Report Title:

ERS; Class H Service

Description:

Creates a new class H membership of the employees' retirement system. Allows employees in service on 12/31/04 to elect to covert their class C membership to class H membership. Requires employees hired on or after 1/1/05, to be designated as class H members. Establishes the parameters for unreduced retirement allowances, service retirement allowances, minimum cash balance benefits, ordinary disability retirement allowances, service-connected disability retirement allowances, death benefits, post retirement allowances, retirement allowance options, rollovers, and the determination of members' rights after separation from service for class H members. (SD2)

THE SENATE

S.B. NO.

779

TWENTY-SECOND LEGISLATURE, 2003

S.D. 2

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

"Part

RETIREMENT FOR CLASS H PUBLIC OFFICERS AND EMPLOYEES

§88-A Definitions. For purposes of this part, the following definitions shall apply:

"Actuarial equivalent": based on the mortality, assumed investment earnings, and other applicable factors in the last preceding actuarial valuation prior to the effective date of this section. All factors used shall be independent of the member's gender.

"Annuitization": equates the present value of an annuity, inclusive of anticipated increases in post-retirement allowances, in the form payable under this part, using actuarial equivalent factors, to the hypothetical account balance.

"Average final compensation": shall be determined in the same manner as section 88-81(c).

"Employee contribution rate": six per cent of a member's compensation.

"Hypothetical account balance": twice the employee contributions made, either by the member or on behalf of the member, inclusive of accumulated interest at the hypothetical interest rate on such employee contributions. This amount shall be reduced by any employee contributions, including rollovers and contributions used to upgrade to class C service, and related accumulated interest, used either to purchase service or treated as voluntary additional contributions.

"Hypothetical interest rate": four and one-half per cent a year, compounded annually. The frequency of interest crediting shall be the same as for class A members.

"Vested status": at least five years of credited service and contributions not withdrawn or rolled over upon the member's termination.

§88-B Election. (a) Members receiving benefits under this part shall be classified as class H members.

(b) Any class C members in service on December 31, 2004, may elect to become a class H member. The election shall be made within ninety-days of the effective date of this Act and shall be irrevocable.

Former class C members shall have the option to upgrade some or all of their class C service to class H service by paying the full actuarial cost of that upgrade. The actuarial cost shall be based on the same actuarial factors as then in use to determine optional modes of retirement allowance.

(c) All employees hired on or after January 1, 2005, shall be class H members.

(d) This part shall provide a defined benefit retirement allowance while providing a minimum hypothetical account balance. If elected by the member, that hypothetical account balance can be taken in either a lump sum payment, rolled over, or annuitized.

§88-C Employee contributions. Each class H member shall contribute six per cent of the member's compensation to the annuity savings fund.

§88-D Service retirement. (a) A member who has at least five years of credited service and has attained the age of sixty-two, or a member with thirty years of credited service who has attained the age of fifty-five, may receive an unreduced retirement allowance after the member has terminated service.

(b) A member who has twenty years of credited service who has attained the age of fifty-five may receive an early retirement allowance reduced for age after the member has terminated service.

§88-E Service retirement allowance. Upon retirement from service, a member shall receive a retirement allowance as follows:

(1) If the member is eligible for an unreduced service retirement allowance, a maximum allowance of two per cent of the member's average final compensation multiplied by the number of years of credited class H service plus one and one-fourth per cent of the member's average final compensation multiplied by the number of years of credited class C service; or

(2) If the member is eligible for a reduced service retirement allowance, the allowance as calculated in subparagraph (1) shall be reduced by five per cent a year for each year the member is less than age sixty-two at retirement.

Notwithstanding any other law to the contrary, the above allowances shall be superseded by the member's annuitized hypothetical account balance, if greater. The benefit limitations in section 88-83.5, relating to Internal Revenue Code, section 415, shall apply.

§88-F Minimum cash balance benefit. The minimum cash balance benefit shall be based on the vested hypothetical account balance at the date the member has terminated service. A member, terminating service for any reason, may receive the member's vested hypothetical account balance in either a lump sum payment, rolled over, or have that balance considered in the member's retirement allowance calculation. If the member elects to receive a lump sum payment under this section or elects to roll over the member's hypothetical account balance, no other benefits under this chapter shall be payable.

In determining whether the retirement allowance calculated under this section would be greater than the retirement allowance to which the terminated member would otherwise be entitled, the annuitized actuarial equivalent of the hypothetical account balance would be calculated and then compared to the retirement allowance to which the member is otherwise entitled. The calculation date for that annuitization shall be the later of the member's age at termination of service or the earliest age at which the member could receive an unreduced service retirement allowance under the applicable section of this chapter.

§88-G Ordinary disability retirement allowance. Upon retirement for ordinary disability, a member shall receive a retirement allowance of two per cent of the member's average final compensation for each year of credited service. The minimum requirement allowance payable under this part shall be twenty-five per cent of the member's average final compensation.

§88-H Service-connected disability retirement allowance. Upon retirement for service-connected disability, a member shall receive a minimum retirement allowance of twenty-five per cent of the member's average final compensation.

§88-I Death benefit. An ordinary death benefit shall be determined in a manner consistent with sections 88-84 and 88-85, with the following exceptions:

(1) A two per cent benefit multiplier shall be used instead of one and one-quarter per cent, where applicable, except that the multiplier will be one and one-quarter per cent for credited service prior to the effective date of this section for those class C members who elect class H status for service prior to this section's effective date which is not upgraded; and

(2) The hypothetical account balance shall be applied.

§88-J Post retirement allowances. There shall be payable to each person receiving any pension, annuity, or retirement allowance a post retirement allowance which shall be consistent with section 88-90(b)(2).

§88-K Retirement allowance options. In lieu of the maximum retirement allowance described in sections 88-E, 88-G, and 88-H, a member may elect to receive the member's retirement allowance pursuant to section 88-283.

§88-L Rollovers. The board shall determine the manner in which rollovers shall be permitted.

§88-M Rights of members separated from service. (a) Section 88-96 shall apply to any member terminating with less than five years of service except that the system shall return all of the member's accumulated contributions.

(b) Any member with at least five years of credited service, who terminates before being eligible to retire, shall have vested status if the member's contributions are not withdrawn pursuant to section 88-96(b)."

SECTION 2. In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 3. This Act shall take effect on January 1, 2020.