STAND. COM. REP. NO. 2431

Honolulu, Hawaii

RE: S.B. No. 3070

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2024

State of Hawaii

Sir:

Your Committee on Labor and Technology, to which was referred S.B. No. 3070 entitled:

"A BILL FOR AN ACT RELATING TO THE EMPLOYEES' RETIREMENT SYSTEM FUNDING PERIOD,"

begs leave to report as follows:

The purpose and intent of this measure is to lower the Employees' Retirement System's funding period to amortize the System's total unfunded accrued liability.

Your Committee received testimony in support of this measure from the Department of Budget and Finance and Employees' Retirement System Board of Trustees.

Your Committee received comments on this measure from the Tax Foundation of Hawaii.

Your Committee finds that the Employees' Retirement System (System) provides pensions to thousands of eligible retired state employees. Your Committee further finds that due to the System's long-term investment performance, the funding period in which the System is expected to be fully funded has steadily decreased from the forecasted thirty years in fiscal year 2015-2016 to twenty-four years in fiscal year 2021-2022. The strategy put in place by the Legislature on July 1, 2017, is accomplishing the original goals, and it is currently projected that the System's funded ratio will continue to improve, and the unfunded actuarial accrued liability is expected to decline year over year going forward. However, there have been changes in professional actuarial industry guidance on appropriate funding policies that now recommend a maximum liability funding period of twenty years or less. To enable the System to comply with this new policy, this measure amends the maximum funding period to amortize the total unfunded accrued liability of the System.

As affirmed by the record of votes of the members of your Committee on Labor and Technology that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 3070 and recommends that it pass Second Reading and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Labor and Technology,

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HENRY J.C. AQUINO, Chair