§88-81.5 Federal tax limits on annual compensation. (a) Effective July 1, 1996, compensation used to determine "average final compensation" under section 88-81 and employee contributions picked up by the employer under section 88-46 or 88-326, shall be subject to the annual limit set forth in section 401(a)(17) of the Internal Revenue Code of 1986, as amended.
(b) Notwithstanding subsection (a), any member who accrued a benefit prior to July 1, 2004, based on annual compensation in excess of the limit set forth in section 401(a)(17) of the Internal Revenue Code of 1986, as amended, shall receive a nontax-qualified benefit equal to the difference between:
(1) The pension benefit that would be payable at the earliest age the member could retire with an unreduced benefit, based on the member's years of credited service, the member's class of service, and the member's average final compensation as of June 30, 2004, without regard to the limit under section 401(a)(17); and
(2) The tax-qualified pension benefit that would be payable at the earliest age the member could retire with an unreduced benefit, based on the member's years of credited service and the member's class of service as of June 30, 2004, and the member's average final compensation as limited by section 401(a)(17) as of the earliest age the member could retire with an unreduced benefit, or, upon the member's termination of service, if earlier.
(c) The nontax-qualified benefit under subsection (b) shall be determined and paid in a single lump sum within the time required to meet federal tax withholding and reporting obligations for the first year the benefit is taxable. The lump sum shall be the actuarial equivalent of a single-life annuity payable at the earliest age the member could retire with an unreduced benefit, assuming that the compensation limit in effect under section 401(a)(17) at the time the benefit is taxable will increase two per cent annually. The actuarial equivalent of the single-life annuity shall be calculated on the following assumptions:
(1) An eight per cent discount rate;
(2) The 1994 Group Annuity Mortality Static Table (Males and Females), published in the Transactions of the Society of Actuaries 1995, vol. 47 (table 18), using a blended mortality table that is a fifty per cent-fifty per cent blend of the 1994 Group Annuity Mortality table for males set back two years and the 1994 Group Annuity Mortality table for females set back one year; and
(3) A two and one-half per cent simple interest cost of living adjustment to the original annuity.
(d) At the earliest age the member could retire with an unreduced benefit, or, upon the member's termination of service, if earlier, the member shall be entitled to an additional payment if the actual compensation limit then in effect under section 401(a)(17) is less than the limit that was assumed to be in effect under subsection (c) as of the date that was assumed to be the member's unreduced retirement age. Such additional payment, if any, shall be the difference between:
(1) The benefit that would have been paid under subsection (c) if the member's unreduced retirement age and the actual section 401(a)(17) limit in effect at the earlier of the member's unreduced retirement age or termination of service had been known and used; and
(2) The benefit that was paid under subsection (c).
The amount of any additional payment shall be adjusted for interest at eight per cent from the date of payment under subsection (c) to the date of payment under this subsection.
(e) The nontax-qualified benefit shall be administered by the board of trustees; provided that:
(1) State members shall be paid with funds appropriated from the State's general revenues; provided that the University of Hawaii and the departments and agencies subject to section 88-125 shall reimburse the State for the respective amounts payable on account of the employees of the University of Hawaii or in such departments and agencies; and
(2) County members shall be paid by the respective counties pursuant to assessments made and received by the system.
(f) Section 88-91 shall apply to the nontax-qualified benefit. [L 2004, c 183, §2; am L 2006, c 169, §12; am L 2007, c 215, §12]
Structure Hawaii Revised Statutes
Title 7. Public Officers and Employees
88. Pension and Retirement Systems
88-3 Payment on death of pensioner.
88-4 Medical aid, etc., when free.
88-5 List of pensioners, who shall provide.
88-6 Payment of refunds and retirement benefits.
88-7 County pensioners; post retirement allowance.
88-8 University of Hawaii optional retirement system.
88-11 Bonus; pensioners' special compensation; amounts available.
88-12 Bonus; requirements, limitations.
88-13 Bonus; retirants not eligible for.
88-14 Bonus; authority to pay.
88-15 Bonus; waiver by veteran.
88-17 Bonus payment; limitation.
88-22 System established; name.
88-22.5 Federal tax qualification requirements.
88-23 General administration of system vested in board.
88-27.5 Closed meetings of the board; authorized.
88-29 Officers, employees, legal adviser.
88-33 Prohibited interest of trustees and employees of board.
88-41 Limitation of other statutes.
88-42.5 Membership of employees holding more than one position, appointment, or office.
88-42.6 Membership of elective officers.
88-43 Persons ineligible for membership.
88-45.5 Acceptance of rollovers and transfers from other plans.
88-46 Deducting employee contributions from salary and employer pick up of employee contributions.
88-48 Deduction in class A member's account.
88-49 Employees paid partly from federal funds.
88-49.3 Employees paid from certain federal funds.
88-49.5 Certain employees subject to federal retirement system; election.
88-49.7 East-West center employees.
88-50 Computation of year of service.
88-50.5 Credit for mandatory maternity leave.
88-51 Membership service generally.
88-52 Service while a member of the legislature.
88-54 Service while legislative employee.
88-54.2 Session employees of the legislature; exempt from mandatory enrollment.
88-54.5 Service while a member of the board of trustees of the office of Hawaiian affairs.
88-55 Services of field civilian personnel of the Hawaii national guard.
88-57 Prior service generally.
88-58 Prior service credit while per diem employee.
88-59 Acquisition of membership service.
88-59.5 Previous membership service credit for legislative officers.
88-59.6 REPEALED. L 2008, c 47, §12.
88-60 Members whose services are on loan to other governments.
88-61 Termination of membership.
88-62 Return to service of a former member.
88-63 Credit for unused sick leave.
88-70 Third application for retirement; withdrawal prohibited and retirement mandatory.
88-71 Credited service at retirement.
88-74 Allowance on service retirement.
88-74.5 Finalizing of pensions.
88-74.6 Unreduced allowance on service retirement; when applicable.
88-74.7 Commencement of benefits on required beginning date.
88-74.8 Forfeiture of benefits; felony convictions.
88-75 Ordinary disability retirement.
88-76 Allowance on ordinary disability retirement.
88-79 Service-connected disability retirement.
88-80 Allowance on retirement for service-connected disability.
88-81 Average final compensation.
88-81.5 Federal tax limits on annual compensation.
88-83 Election of retirement allowance option.
88-84.5 Federal limits on annual compensation for ordinary death benefit.
88-85 Accidental death benefit.
88-85.5 Applications for accidental death benefits; approval by the system.
88-87 Adjustment for deficiency in accumulated contributions.
88-88 Adjustment of retirement allowances of retirants.
88-90 Post retirement allowances.
88-91 Exemption from taxation and execution.
88-92 Garnishment in certain cases; procedure.
88-94 Withholding of income taxes.
88-95 Withholding of dues and insurance premiums.
88-96 Rights of members separated from service.
88-97 Return to service of a member who has vested benefit status.
88-98 Return to service of a retirant.
88-99 Moratorium on benefit enhancements
88-100 Payment by employers of costs associated with significant non-base pay increases.
88-101 Payment of existing pensions.
88-102 Classification of members.
88-105 Actuarial investigations, valuations.
88-105.5 Stress test; annual report.
88-106.5 Compromise and settlement
88-108 Cash for meeting disbursements.
88-110 Board; trustees of funds.
88-111 Custodian of the funds.
88-112 Annuity savings fund; annual statement.
88-113 Payments from annuity savings fund.
88-114 Pension accumulation fund.
88-115.5 REPEALED. L 1998, c 151, §18.
88-119.5 Investment guidelines.
88-121 Power to make agreements to protect securities on reorganization or otherwise.
88-121.5 Power to enter into security loan agreements.
88-122 Determination of employer normal cost and accrued liability contributions.
88-123 Amount of annual contributions by the State and counties.
88-124 Payment of state contributions to the system.
88-125 Contributions by certain state agencies.
88-126 Payment of county contributions to the system.
88-126.5 Advance payments of state and county contributions to the system.
88-132 Service credit; payment of contributions.
88-133 Benefits and conditions applicable to service member.
88-134 Service retirement benefit.
88-135 Ordinary disability retirement benefit.
88-136 Accidental disability benefit.
88-137 Ordinary death benefit.
88-138 Accidental death benefit.
88-139 Return of contributions.
88-140 Duration of service member's status.
88-141 Computation of compensation earned or earnable.
88-142 Right of amendment or repeal reserved; retroactive effect.
88-152 Certain other employees included.
88-153 Police officers, firefighters, and bandsmen pension system; trustees, powers.
88-154 Officers of the board; duties.
88-156 Appropriations and expenditure.
88-157 Use of donations, contributions, gifts, or bequests.
88-158 Disability retirement benefits.
88-159 Reexamination of disability beneficiary; hearing.
88-160 Service retirement benefits.
88-161 Dismissal after twenty years' service; pensions.
88-162 Dismissal after ten years' service; pension.
88-163 Death benefits: funeral expenses; payments to dependents.
88-164 Benefits in lieu of other payments.
88-165 Adjustments of pensions.
88-166 Computation; service as police officer, firefighter, or bandsman.
88-167 Computation; prior credits.
88-168 Orders, discipline, medical examination, etc.
88-169 Payments of pensions; inalienable.
88-171 Public hearings; notice.
88-181 Pension boards created.
88-182 Members: appointment, terms, removals.
88-184 Expenses; appropriations.
88-185 Assistants; county clerk, attorney, and treasurer.
88-189 Widow's, widower's, and reciprocal beneficiary's pensions.
88-191 Computation of service.
88-192 Examination by physician.
88-193 Compliance with law required.
88-202 Restrictions as to personnel.
88-204 County appropriations directed.
88-212 Federal-state agreement.
88-213 Division of retirement systems.
88-214 Modifications to agreement.
88-215 Contributions by state employees.
88-216 Collection of contributions.
88-218 Plans for coverage of employees of political subdivision.
88-220 Refusal or termination of plans.
88-221 Payments by political subdivisions.
88-222 Contributions by employees of political subdivisions.
88-224 Contribution fund; established.
88-225 Purpose of contribution fund.
88-226 Payments to federal government.
88-228 Appropriations to contribution fund.
88-273 Break in service; reemployment.
88-321 Election and membership.
88-322 Conversion of previous credited service.
88-323 Class H credited service.
88-324 Acquisition of membership service.
88-325 Employee contributions.
88-326 Deducting employee contributions from salary and employer pick up of employee contributions.
88-282 Service retirement allowance.
88-283 Election of retirement allowance option.
88-284 Ordinary disability retirement.
88-285 Service-connected disability retirement.
88-332 Service retirement allowance.
88-333 Election of retirement allowance option.
88-334 Ordinary disability retirement.
88-335 Ordinary disability retirement allowance.
88-336 Service-connected disability retirement.
88-337 Service-connected disability retirement allowance.
88-338 Ordinary death benefit.
88-339 Accidental service-connected death benefit
88-340 Termination of membership.
88-341 Rights of members separated from service.
88-342 Return to service of a former member without vested benefit status.
88-343 Return to service of a former member who has vested benefit status.