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HB1082
HOUSE OF REPRESENTATIVES
H.B. NO.
1082
THIRTY-THIRD LEGISLATURE, 2025
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
legislature finds that employees who became members of the employees'
retirement system before July 1, 2012, commonly referred to as "Tier 1
members", are required to have a minimum of five years of credited service
to be eligible for vested benefit status, which, among other things, permits a
member to receive a retirement allowance upon service retirement.
�
By contrast, employees who become members
after June 30, 2012, commonly referred to as "Tier 2 members", are
required to have a minimum of ten years of credited service to be eligible for
vested benefit status.
����
Although the two-tier member structure has
assisted the employees' retirement system in its efforts to achieve full
funding of its actuarial accrued liability, actuaries have determined that
reducing the minimum number of years of credited service Tier 2 members must
have to be eligible for vested benefit status from ten years to five years to
match Tier 1 members would increase the projected full funding period only by
an estimated four additional months and would require an increase in employer contribution
rates of less than a quarter per cent.
����
The legislature also finds that reducing
the minimum number of years of credited service Tier 2 members must have to be
eligible for vested benefit status from ten years to five years would help
state and county employers with the recruitment and retention of qualified
employees.
�
Reducing employee turnover
and retaining employees on the job longer may also help to reduce employer
costs.
�
The legislature further finds
that these benefits outweigh impacts to the employees' retirement system's
unfunded liability and projected full funding period, as well as to employer
contributions.
����
Notwithstanding section 88-99, Hawaii
Revised Statutes, the purposes of this Act are to:
����
(1)
�
Reduce
the minimum number of years of credited service qualified Tier 2 members must
have to be eligible for vested benefit status for service retirement allowance
purposes from ten years to five years; and
����
(2)
�
Increase
employer contributions to offset the liability produced by the vesting changes.
����
SECTION 2.
�
Section 88-62, Hawaii Revised Statutes, is amended by amending
subsection (b) to read as follows:
����
"(b)
�
[
For
]
Notwithstanding section 88-99, for
members who
become members after June 30, 2012:
����
(1)
�
If
a former member who has fewer than ten years of credited service and who has
been out of service for a period of four full calendar years or more after the
year in which the former member left service, or if a former member who
withdrew the former member's accumulated contributions returns to service, the
former member shall become a member in the same manner and under the same
conditions as anyone first entering service; however, the former member may
obtain membership service credit in the manner provided by applicable law for
credited service that was forfeited by the member upon termination of the
member's previous membership.
�
If the
member did not withdraw the former member's accumulated contributions prior to
the former member's return to service, the accumulated contributions shall be
returned to the member as part of the process of enrolling the member in the
system if the member's accumulated contributions are $1,000 or less at the time
of distribution.
�
If the accumulated
contributions for the service the member had when the member previously
terminated employment are greater than $1,000 and the member does not make
written application, prior to or contemporaneously with the member's return to
service, for return of the accumulated contributions, the member may not
withdraw the member's accumulated contributions, except as provided by section
88-96 or 88-341, until the member retires or attains age sixty-two.
�
The member shall not be entitled to service
credit by reason of the system's retention of the member's accumulated contributions
for the service the member had when the member previously terminated
employment.
�
To be eligible for any
benefit, the member shall fulfill the membership service requirements for the
benefit through membership service after again becoming a member, in addition
to meeting any other eligibility requirement established for the benefit;
provided that the membership service requirement shall be exclusive of any
former service acquired in accordance with section 88�59 or any other section
in part II, VII, or VIII;
����
(2)
�
If
a former member with fewer than ten years of credited service and who did not
withdraw the former member's accumulated contributions returns to service
within four full calendar years after the year in which the former member left
service, the former member shall again become a member in the same manner and
under the same conditions as anyone first entering service, except that the
member shall be credited with service credit for the service the member had
when the
�
member terminated employment:
���������
(A)
�
If
the member returns to service as a class A or class B member, the member's new
and previous accumulated contributions shall be combined; or
���������
(B)
�
If
the member returns to service as a class H member, section 88-321(b) shall
apply; [
and
]
����
(3)
�
If
a former member [
with ten or more years of credited service who did not
withdraw the former member's contributions
]
who has vested benefit
status as provided in section 88-96(b)
returns to service, the former
member's status shall be in accordance with the provisions described in section
88-97[
.
]
;
����
(4)
�
If
a former member who has fewer than five years of credited service and who has
been out of service for a period of four full calendar years or more after the
year in which the former member left service, or if a former member withdrew
the former member's accumulated contributions returns to service and remains in
service as of July 1, 2027, or returns to service after June 30, 2027, the
former member shall become a member in the same manner and under the same
conditions as anyone first entering service; provided that the former member
may obtain membership service credit in the manner provided by applicable law
for credited service that was forfeited by the member upon termination of the
member's previous membership.
�
If the
member did not withdraw the former member's accumulated contributions prior to
the former member's return to service, the accumulated contributions shall be
returned to the member as part of the process of enrolling the member in the
system if the member's accumulated contributions are $1,000 or less at the time
of distribution.
�
If the accumulated
contributions for the service the member had when the member previously
terminated employment are greater than $1,000 and the member does not make
written application, prior to or contemporaneously with the member's return to
service, for return of the accumulated contributions, the member may not
withdraw the member's accumulated contributions, except as provided by section
88-96 or 88�341, until the member retires or attains age sixty�two.
�
The member shall not be entitled to service
credit by reason of the system's retention of the member's accumulated
contributions for the service the member had when the member previously
terminated employment.
�
To be eligible
for any benefit, the member shall fulfill the membership service requirements
for the benefit through membership service after again becoming a member, in
addition to meeting any other eligibility requirement established for the
benefit; provided that the membership service requirement shall be exclusive of
any former service acquired in accordance with section 88-59 or any other
section in part II, VII, or VIII; and
����
(5)
�
If
a former member who has fewer than five years of credited service and who did
not withdraw the former member's accumulated contributions returns to service
and remains in service as of July 1, 2027, or returns to service after June 30,
2027, and who returns to service within four full calendar years after the year
in which the former member left service, the former member shall again become a
member in the same manner and under the same conditions as anyone first
entering service, except that the member shall be credited with service credit
for the service the member had when the member terminated employment:
���������
(A)
�
If the member returns to service as a class A or class B member,
the member's new and previous accumulated contributions shall be combined; or
���������
(B)
�
If the member returns to service as a class H member, section
88-321(b) shall apply.
"
����
SECTION 3.
�
Section 88-73, Hawaii Revised Statutes, is amended as follows:
����
(1)
�
By amending subsections (a) and (b) to read as follows:
����
"(a)
�
[
Any
]
Notwithstanding section 88-99, any
member who:
����
(1)
�
Became
a member before July 1, 2012, and has at least five years of credited service
and has attained age fifty�five;
����
(2)
�
Became
a member before July 1, 2012, and has at least twenty�five years of credited
service;
����
(3)
�
Has
at least ten years of credited service, which includes service as a judge
before July 1, 1999, an elective officer, or a legislative officer;
����
(4)
�
Becomes
a member after June 30, 2012, and has at least ten years of credited service
and has attained age sixty; [
or
]
����
(5)
�
Becomes
a member after June 30, 2012, and has at least twenty-five years of credited
service and has attained age fifty-five[
,
]
; or
����
(6)
�
Becomes
a member after June 30, 2012, and who is in service as of July 1, 2027, or who
returns to service or becomes a member after June 30, 2027, and has at least
five years of credited service and has attained the age of sixty,
shall
become eligible to receive a retirement allowance after the member has
terminated service.
����
(b)
�
Any member who first earned credited service as a judge after June 30,
1999, but before July 1, 2012, and who has at least five years of credited
service and has attained age fifty-five or has at least twenty�five years of
credited service shall become eligible to receive a retirement allowance after
the member has terminated service.
�
Any
member who first earned credited service as a judge after June 30, 2012, and
has at least ten years of credited service and has attained age sixty
,
or has at least twenty-five years of credited service and has attained age
fifty-five
,
shall be eligible to receive a retirement allowance after
the member has terminated service.
�
Any
member who first earned credited service as a judge after June 30, 2012, and
who is in service as of July 1, 2027, or thereafter, and has at least five
years of credited service and has attained age sixty, shall be eligible to
receive a retirement allowance after the member has terminated service.
"
����
(2)
�
By amending subsection (f) to read as follows:
����
"(f)
�
A member's right to the member's accrued retirement benefit is
nonforfeitable upon the attainment of normal retirement age and the completion
of the requisite years of credited service.
����
For the purpose of this subsection:
����
"Normal retirement age" means age
sixty�five.
����
"Requisite years of credited service"
means five years for class A and B members who became members before July 1,
2012[
, and
]
;
ten years for class A and B members who became
members after June 30, 2012[
.
]
; and five years for class A and B
members who became members after June 30, 2012, and who are in service as of
July 1, 2027, or who returned to service or became a member after June 30,
2027.
"
����
SECTION 4.
�
Section 88-96, Hawaii Revised Statutes, is amended by amending
subsections (a) and (b) to read as follows:
����
"(a)
�
Any member who ceases to be an employee and who became a member before
July 1, 2012, and has fewer than five years of credited service, excluding
unused sick leave[
,
]
;
or who becomes a member after June 30,
2012, and has fewer than ten years of credited service, excluding
unused
sick leave[
,
]
; or who becomes a member after June 30, 2012, and who
is in service as of July 1, 2027, or who returns to service after June 30,
2027, and has fewer than five years of credited service, excluding unused sick
leave; or who becomes a member after June 30, 2027, and has fewer than five
years of credited service, excluding unused sick leave,
shall, upon
application to the board, be paid all of the member's accumulated contributions
and the member's membership shall thereupon terminate and all credited service
shall be forfeited; provided that a member shall not be paid the member's
accumulated contributions:
����
(1)
�
If
the member becomes an employee again within fifteen calendar days from the date
the member ceased to be an employee; or
����
(2)
�
If,
at the time the application for return of accumulated contributions is received
by the board, the member has become an employee again.
����
Regular interest shall be credited to the
former employee's account until the former employee's accumulated contributions
are returned to the former employee; provided that the former employee's
membership shall not continue after the fourth full year following the calendar
year in which the individual's employment terminates.
�
Upon termination of the former employee's
membership, the former employee's credited service shall be forfeited and, if
the former employee's accumulated contributions are $1,000 or less at the time
of distribution, the system shall return the former employee's contributions to
the former employee.
�
If the former
employee does not become an employee again and if the former employee's
accumulated contributions have not been withdrawn by the former employee or
previously returned by the system to the former employee, the system shall
return the former employee's accumulated contributions to the former employee
as soon as possible after the later of:
�
(A)
�
the former employee attaining
age sixty-two; or (B)
�
the termination of
the former employee's membership.
����
(b)
�
Any member who ceases to be an employee and who became a member before
July 1, 2012, and has more than five years of credited service, excluding
unused sick leave[
,
]
;
or who becomes a member after June 30,
2012, and has more than ten years of credited service, excluding
unused
sick leave[
,
]
; or who becomes a member after June 30, 2012, and who
is in service as of July 1, 2027, or who returns to service after June 30,
2027, and has more than five years of credited service, excluding unused sick
leave; or who becomes a member after June 30, 2027, and has more than five
years of credited service, excluding unused sick leave,
shall, upon
application to the board, be paid all of the member's accumulated contributions
and thereupon the former employee's membership shall terminate and all credited
service shall be forfeited; provided that a member shall not be paid the member's
accumulated contributions:
����
(1)
�
If
the member becomes an employee again within fifteen calendar days from the date
the member ceased to be an employee; or
����
(2)
�
If,
at the time the application for return of accumulated contributions is received
by the board, the member has become an employee again.
����
If the contributions are not withdrawn by
the former employee within four calendar years following the calendar year in
which the former employee's employment terminates, the former
�
employee shall have established vested
benefit status and shall be eligible for the service retirement benefit in
effect at the time of the former employee's retirement, payable in accordance
with this chapter; provided that
,
if the former employee withdraws the
former employee's accumulated contributions, the former employee's vested
benefit status shall terminate and all credited service shall be forfeited."
����
SECTION 5.
�
Section 88-122, Hawaii Revised Statutes, is amended by amending
subsection (e) to read as follows:
����
"(e)
�
Commencing with fiscal year 2005-2006 and each subsequent fiscal year
until fiscal year 2007-2008, the employer contributions for normal cost and
accrued liability for each of the two groups of employees in subsection (a)
shall be based on fifteen and three-fourths per cent of the member's
compensation for police officers, firefighters, and corrections officers and
thirteen and three-fourths per cent of the member's compensation for all other
employees.
�
Commencing with fiscal year
2008-2009 and each subsequent fiscal year until fiscal year 2011-2012, the
employer contributions for normal cost and accrued liability for each of the
two groups of employees in subsection (a) shall be based on nineteen and
seven-tenths per cent of the member's compensation for police officers,
firefighters, and corrections officers and fifteen per cent of the member's
compensation for all other employees.
�
In
fiscal year 2012-2013, the employer contributions for normal cost and accrued
liability for each of the two groups of employees in subsection (a) shall be
based on twenty-two per cent of the member's compensation for police officers,
firefighters, and corrections officers and fifteen and one-half per cent of the
member's compensation for all other employees.
�
In fiscal year 2013-2014, the employer
contributions for normal cost and accrued liability for each of the two groups
of employees in subsection (a) shall be based on twenty-three per cent of the
member's compensation for police officers, firefighters, and corrections
officers and sixteen per cent of the member's compensation for all other
employees.
�
In fiscal year 2014-2015, the
employer contributions for normal cost and accrued liability for each of the
two groups of employees in subsection (a) shall be based on twenty-four per
cent of the member's compensation for police officers, firefighters, and
corrections officers and sixteen and one-half per cent of the member's
compensation for all other employees.
�
Commencing with fiscal year 2015-2016 until
fiscal year 2016-2017, the employer contributions for normal cost and accrued
liability for each of the two groups of employees in subsection (a) shall be
based on twenty-five per cent of the member's compensation for police officers,
firefighters, and corrections officers and seventeen per cent of the member's
compensation for all other employees.
�
In
fiscal year 2017-2018, the employer contributions for normal cost and accrued
liability for each of the two groups of employees in subsection (a) shall be
based on twenty-eight per cent of the member's compensation for police
officers, firefighters, and corrections officers and eighteen per cent of the
member's compensation for all other employees.
�
In fiscal year 2018-2019, the employer
contributions for normal cost and accrued liability for each of the two groups
in subsection (a) shall be based on thirty-one per cent of the member's
compensation for police officers, firefighters, and corrections officers and
nineteen per cent of the member's compensation for all other employees.
�
In fiscal year 2019-2020, the employer
contributions for normal cost and accrued liability for each of the two groups
in subsection (a) shall be based on thirty-six per cent of the member's
compensation for police officers, firefighters, and corrections officers and
twenty-two per cent of the member's compensation for all other employees.
�
Commencing with fiscal year 2020-2021 and each
subsequent fiscal year, the employer contributions for normal cost and accrued
liability for each of the two groups in subsection (a) shall be based on
forty-one per cent of the member's compensation for police officers,
firefighters, and corrections officers and twenty-four per cent of the member's
compensation for all other employees.
�
Commencing
with fiscal year 2025-2026 and each subsequent fiscal year, the employer
contributions for normal cost and accrued liability for each of the two groups
in subsection (a) shall be based on forty-one and nineteen hundredths per cent
of the member's compensation for police officers, firefighters, and corrections
officers and twenty-four and nineteen hundredths per cent of the member's
compensation for all other employees.
�
The contribution rates shall amortize the
total unfunded accrued liability of the entire plan over a period not to exceed
the maximum funding period.
����
The contribution rates shall be subject to
adjustment:
����
(1)
�
If
the actual period required to amortize the unfunded accrued liability exceeds
the maximum funding period;
����
(2)
�
If
there is no unfunded accrued liability; or
����
(3)
�
Based
on the actuarial investigation conducted in accordance with section 88-105."
����
SECTION 6.
�
Section 88-331, Hawaii Revised Statutes, is amended as follows:
����
(1)
�
By amending subsection (a) to read as follows:
����
"(a)
�
[
A
]
�
Notwithstanding
section 88-99, a
class H member who:
����
(1)
�
Became
a member before July 1, 2012, has at least five years of credited service, and
has attained age sixty-two;
����
(2)
�
Became
a member before July 1, 2012, has at least thirty years of credited service,
and has attained the age of fifty�five; [
or
]
����
(3)
�
Becomes
a member after June 30, 2012, has at least ten years of credited service, and
has attained age sixty-five; [
or
]
����
(4)
�
Becomes
a member after June 30, 2012, has at least thirty years of credited service,
and has attained age sixty[
,
]
; or
����
(5)
�
Becomes
a member after June 30, 2012, and who is in service as of July 1, 2027, or who
returns to service or becomes a member after June 30, 2027, and has at least
five years of credited service and has attained the age of sixty-five,
shall
become eligible to receive a retirement allowance after the member has
terminated service."
����
(2)
�
By amending subsection (f) to read as follows:
����
"(f)
�
A member's right to the member's accrued retirement benefit is
nonforfeitable upon the attainment of normal retirement age and the completion
of the requisite years of credited service.
����
For the purpose of this subsection:
����
"Normal retirement age" means age
sixty-five.
����
"Requisite years of credited service"
means five years for class H members who became members before July 1, 2012[
,
and
]
;
ten years for class H members who became members after June
30, 2012[
.
]
; and five years for class H members who became members
after June 30, 2012, and who are in service as of July 1, 2027, or who returned
to service or became a member after June 30, 2027.
"
����
SECTION 7.
�
Section 88�338, Hawaii Revised Statutes, is amended by amending subsection
(a) to read as follows:
����
"(a)
�
Upon receipt by the system of proper proof of a class H member's death
occurring in service or while on authorized leave without pay and if no pension
is payable under section 88�339, there shall be paid to the member's designated
beneficiary an ordinary death benefit as follows:
����
(1)
�
The
member's accumulated contributions shall be paid to the member's designated
beneficiary if:
���������
(A)
�
The
member became a member before July 1, 2012, and had less than five years of
credited service at the time of death; [
or
]
���������
(B)
�
The
member became a member after June 30, 2012, and had less than ten years of
credited service at the time of death;
or
���������
(C)
�
The
member became a member after June 30, 2012, and was in service as of July 1,
2027, or who returned to service or became a member after June 30, 2027, and
had less than five years of credited service at the time of death;
����
(2)
�
An
amount equal to the
member's
hypothetical account
balance shall be paid to the member's designated beneficiary if:
���������
(A)
�
The
member became a member before July 1, 2012, and had five or more years of
credited service at the time of death; [
or
]
���������
(B)
�
The
member became a member after June 30, 2012, and had ten or more years of
credited service at the time of death;
or
���������
(C)
�
The member became a member after June 30, 2012, and was in
service as of July 1, 2027, or who returned to service or became a member after
June 30, 2027, and had five or more years of credited service at the time of
death;
����
(3)
�
If
the member had ten or more years of credited service at the time of death, the
member's designated beneficiary may elect to receive in lieu of any other
payment provided in this section, the allowance that would have been payable as
if the member had retired on the first day of a month following the member's
death, except for the month of December when retirement on the first or last
day of the month shall
�
be allowed.
�
Benefits payable under this paragraph shall
be calculated under option 3 of section 88�83 and computed on the basis of
section 88-332, unreduced for age; or
����
(4)
�
If
the member was eligible for service retirement at the time of death, the member's
designated beneficiary may elect to receive in lieu of any other payment
provided in this section, the allowance that would have been payable as if the
member had retired on the first day of a month following the member's death,
except for the month of December when retirement on the first or last day of
the month shall be allowed.
�
Benefits
payable under this paragraph shall be calculated under option 2 of section
88-83 and computed on the basis of section 88-332."
����
SECTION 8.
�
Section 88-341, Hawaii Revised Statutes, is amended by amending
subsections (a) and (b) to read as follows:
����
"(a)
�
Any class H member who ceases to be an employee and who became a member
before July 1, 2012, and has fewer than five years of credited service,
excluding unused sick leave[
,
]
;
or who becomes a member after
June 30, 2012, and has fewer than ten years of credited service, excluding
unused sick leave[
,
]
; or who becomes a member after June 30, 2012,
and who is in service as of July 1, 2027, or who returns to service or becomes
a member after June 30, 2027, and has fewer than five years of credited service,
excluding unused sick leave,
shall, upon application to the board, be paid
all of the former employee's accumulated contributions, and the former employee's
membership shall thereupon terminate and all credited service shall be
forfeited; provided that an individual shall not be paid the individual's
accumulated contributions if either:
����
(1)
�
The
individual becomes an employee again within fifteen calendar days from the date
the individual ceased to be an employee; or
����
(2)
�
At
the time the application for return of accumulated contributions is received by
the board, the individual has become an employee again.
����
Regular interest shall be credited to the
former employee's account until the former employee's accumulated contributions
are withdrawn; provided that the former employee's membership shall not
continue after the fourth full year following the calendar year in which the
individual's employment terminates.
�
If
the former employee does not become an employee again and has not withdrawn the
former employee's accumulated contributions, the system shall return the former
employee's accumulated contributions to the former employee as soon as possible
after the later of:
�
(A)
�
the former employee attaining age sixty�two;
or (B)
�
the termination of the former
employee's membership.
����
(b)
�
Any class H member who ceases to be an employee and who became a member
before July 1, 2012, and has more than five years of credited service,
excluding unused sick leave[
,
]
;
or who becomes a member after
June 30, 2012, and has more than ten years of credited service, excluding
unused
sick leave[
,
]
; or who becomes a member after June 30, 2012, and who
is in service as of July 1, 2027, or who returns to service or becomes a member
after June 30, 2027, and has more than five years of credited service, excluding
unused sick leave,
shall, upon application to the board, be paid an amount
equal to the former employee's hypothetical account balance and the former
employee's membership shall thereupon terminate and all credited service shall
be forfeited; provided that the individual shall not be paid the individual's
hypothetical account balance if either:
����
(1)
�
The
individual becomes an employee again within fifteen calendar days from the date
the individual ceased to be an employee; or
����
(2)
�
At
the time the application for payment of the individual's hypothetical account
balance is received by the board, the individual has become an employee again.
����
If the contributions are not withdrawn by
the former employee after the individual's employment terminates, the former
employee shall have vested benefit status and shall be eligible for the service
retirement benefit in effect at the time of the former employee's retirement,
payable in accordance with this chapter."
����
SECTION 9.
�
This Act does not affect the rights, duties, and obligations that
matured or were vested, or proceedings that were begun, before its effective
date, including but not limited to, any membership that was terminated,
credited service that was forfeited, retirement that was finalized, or benefits
which were paid.
����
SECTION 10.
�
Statutory material to be repealed is bracketed and stricken.
�
New statutory material is underscored.
����
SECTION 11.
�
This Act shall take effect upon its approval.
INTRODUCED BY:
_____________________________
BY REQUEST
Report Title:
ERS; Credited Service; Benefits; Employer Contributions
Description:
Reduces the minimum number of years of credited service
qualified Tier 2 Employees' Retirement System members must have to be eligible
for vested benefit status for service retirement allowance purposes from ten
years to five years.
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Increases employer
contributions to offset the resulting liability.
The summary description
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not legislation or evidence of legislative intent.