Hawaii Employees’ Retirement System

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The Hawaii Employees’ Retirement System provides retirement, disability and survivor benefits for all state and county employees. As of June 2017 the system had 120,624 members including retirees and beneficiaries. Hawaii’s pension program — like those of many other states — is severely underfunded.

The Latest

In an audit done by Gabriel Roeder Smith & Co. the unfunded actuarial accrued liability (UAAL) was expected to increase from the prior year. In addition, the system had a liability loss caused by individual salary increases. The system also experienced a less than expected return on its investments.As a result, the unfunded liability grew to $12.4 billion or 54.7 % of the total required.
“We have determined that the funding period for paying off the UAAL of the system (in aggregate) is 66 years. Because this period exceeds 30 years, the objectives set in State statute are currently not being realized,” the auditors reported. (Hawaii Revised Statutes §88122(e)(1) state that the employer contribution rates are subject to adjustment when the funding period is in excess of 30 years.)

“The system also experienced a loss on its investments. As a result,” the report said, “the UAAL grew based on this actuarial valuation as of June 30, 2016, ERS’s underfunded status as measured by the UAAL is now $12.441billion.”

Because of the less favorable investment performance in FY2016, the system is now deferring $929 million in investment losses (compared with $42 million in deferred gains last year), the report said. “If there are no significant investment gains or other actuarial gains over the next three years, the funded status of the system would be expected to decrease, as the remaining deferred investment losses are recognized.”

The ERS portfolio of investments had a total value of $14.99 billion in 2016 an increase of  about 5.6 percent over 2015. The amount invested in FY2016 was $13.6 billion and returned $357 million or about $2.6%.

Hawaii’s funded ratio has steadily declined from a high of 95 percent in 2000. As of June 30, 2016 the ERS was 54.7 percent funded compared to 59.2 percent as of June 30, 2015.

The ERS provides retirement and survivor benefits for most state and county employees. The system includes some 120, 624 members, including 67,377 active members, 45,506 retirees and beneficiaries, and 7,741 inactive, vested members.

Because about 90 percent of the retirees stay in Hawaii, the pension program is a significant economic driver in the islands.

Since the 2008 economic downturn, the board of directors has taken action to put risk management at the center of its investing strategy, according to the board’s report for 2015. The report said this will help it weather downturns in the future.

During FY2015, ERS paid out $1.81 billion in benefits, an increase over the previous year. The program’s net assets were roughly $14.5 billion as of June 30, 2015. The ERS Board of Trustees invests these assets with a goal of a 7 percent annual return.

History

The Legislature established the ERS in 1926.

Pension administrators blame the program’s financial woes on decisions between 1967 and 2005 to divert $1.687 billion of excess investment earnings from the pension program to fund other public programs.

In 1999, the Legislature enacted Act 100, which diverted $346.9 million from ERS investment earnings to help balance the state and county budgets. In 2007, the Hawaii State Supreme Court ruled that Act 100 was unconstitutional.

In 2005, the administration and Legislature halted the diversion of investment earnings, and none of the excess earnings have been diverted since.

In 2008 and 2009, as the result of the global financial crisis, ERS suffered a combined investment loss of $2.4 billion, and like many public retirements funds in the United States, has been struggling to recover.

Plans

The pension program offers three plans: Contributory, Noncontributory and Hybrid.

In an effort to save money, the 2011 Legislature passed new retirement rules for incoming employees hired after June 30, 2012.

Read about the new rules and changes to members’ plans.

ERS members also can find information on their plans on the ERS website, and use an online benefits calculator to figure out their pension benefits.

Key Reports

2016 Actuarial Valuation Report

2015 Actuarial Valuation Report

Trustees

The ERS is administratively attached to the Department of Budget and Finance.

The program is overseen by a board of trustees comprised of eight members. Every decision the board makes requires at least five votes. The trustees are not paid for their service.

 

Elected Trustees

Patrick Frane

Jackie Ferguson-Miyamoto

Emmit Kane

Catherine Chan

Appointed Trustees

Colbert M. Matsumoto

Jerome Rauckhorst

Vincent Barfield

Ex-officio

Wesley K. Machida
Staff

Thomas Williams
Executive Director
(808)586-1700
thomas.williams@hawaii.gov

Kanoe Margol
Deputy Executive Director
(808)586-1702
kanoe.margol@hawaii.gov

Vijoy (Paul) Chattergy
Chief Investment Officer
(808)586-1727
vijoy.chattergy@hawaii.gov

Karl Kaneshiro
Benefits Manager
(808)586-1649
karl.kaneshiro@hawaii.gov

Larry Wolfe
Accounting Manager
(808)586-1728
larry.wolfe@hawaii.gov

Keith Miyamoto
Information Technology Manager
(808)586-1713
keith.miyamoto@hawaii.gov

Diane Tengan
Staff Services Assistant
(808)586-1682
diane.tengan@hawaii.gov

Donna Curry
Program Specialist
(808)586-1678
donna.curry@hawaii.gov

Hawaii Employees’ Retirement System

January 2017

Monday, January 23

Ige Promises Skeptical Lawmakers He’ll Supply More Budget Details

Tuesday, January 10

Hawaii Pension Fund Shortfall Hits $12 Billion

November 2016

Wednesday, November 2

What Should The State Do With Any Surplus Funds?

August 2016

Tuesday, August 23

State Gets TRO Against Itself

Tuesday, August 9

Hawaii Is Suing Itself Over New Benefits Law

July 2016

Monday, July 18

Labor Pains: Still No Deal On Bill To Assist Maui Hospital Workers

Tuesday, July 12

Lawmakers, Governor Seek Compromise On Maui Hospital Bill

June 2016

Friday, June 10

Honolulu Is Short $1.4 Billion To Cover Retirees’ Pension Benefits

Wednesday, June 1

Hawaii 45th For Fiscal Solvency

January 2016

Wednesday, January 27

Should Hawaii Stop Investing In Coal, Oil?

October 2015

Friday, October 30

Hawaii Paid $500,000 To Dead People Over 5 Years, Report Shows

October 2012

Tuesday, October 9

Hawaii Pension Chief Says Caldwell Wrong About Cayetano Fund Raid

May 2012

Tuesday, May 15

Pension Spiking Measures Await Gov’s OK

March 2012

Saturday, March 10

Digging Hawaii’s Public Pension Fund Out of $8 Billion Hole Will Hurt

Friday, March 9

Hawaii Public Pension System’s Unfunded Liability Swells 14%

February 2012

Saturday, February 18

Wishing We Didn’t Have to Pay the Piper

January 2012

Friday, January 27

Civil Beat Poll – Hawaii Public Pension Woes Weigh on Voters

Wednesday, January 25

More Work Required to Fix the Public Employee Pension System

Wednesday, January 18

Hawaii Pension System Proposes New OT Rules

December 2011

Wednesday, December 28

Over Past 10 Years, Hawaii Pension Investments At Bottom of Pack

Friday, December 23

Excessive OT for Ambulance Workers Highlights Strain on Pension System

November 2011

Tuesday, November 22

What Can Hawaii Learn From Other States About Pension Spiking?

Thursday, November 10

Hawaii Public Pension Fund Lost $1.4 Billion Since June

October 2011

Friday, October 21

Hawaii Retirement System Looks to Curb Pension Scams

September 2011

Tuesday, September 13

Hawaii Public Pension System Will Get $2.4M Efficiency Overhaul

August 2011

Wednesday, August 17

Hawaii Pension Fund Gains 21% Through June

July 2011

Saturday, July 2

I Was Wrong In Article About Lawmaker Pensions

June 2011

Tuesday, June 21

Hawaii Budget Chief: Tax Hikes Likely to Cover Cost of Retirees’ Health Care

Monday, June 13

Hawaii Lawmakers’ 2011 Retirement System Bill Nothing to Brag About

Saturday, June 11

Hawaii Retirement, Health Benefit Costs Down On Paper, Up in Reality

May 2011

Wednesday, May 25

Did Hawaii Do Enough To Fix Public Pensions?

Saturday, May 14

Temple’s Take: Lawmakers Should Have Taken Own Pension Medicine

Thursday, May 5

Hawaii Lawmakers Agree to Pension Reform for New Hires

April 2011

Saturday, April 23

How Realistic Is Hawaii Pension Fund’s New Expected Rate of Return?

Sunday, April 17

Only Changes to Design of Hawaii Public Employees Pension System Can Fix It

Sunday, April 3

Pension Execs, Lawmaker Offer Steps to Fix Hawaii Public Pension System

Fixing Hawaii’s Public Employees’ Pension Plan

Berish Series Misleading

March 2011

Tuesday, March 22

Getting Discussion of Hawaii Public Pension System Back on Track

Friday, March 18

Chairman of ERS Board Responds to Civil Beat Series on Public Pensions

Tuesday, March 1

Hawaii, Like U.S., Getting Old and Turning Gray

February 2011

Monday, February 21

Dear Legislator: Don’t Pass Any Retirement Bills

Wednesday, February 16

A Way To Save Hawaii’s Government Employees’ Retirement System

Friday, February 11

Personal Insults Flung at Gov During Senate Hearing

Wednesday, February 9

Actuary Challenges Claims of Retirement Board Chair

Lawmakers Commit $300 Million to Fix Pension Mess

Monday, February 7

The Why and What Of ‘Retirement Systems’

Friday, February 4

Week 40: It’s All About Serving You

Tuesday, February 1

As a Matter of Fact: Don’t Believe Claim About Hawaii Pension System

January 2011

Friday, January 28

Hawaii Ranks Near Top for Debt and Pension Liability

Thursday, January 27

Actuary Examines Hawaii Employees’ Retirement System

Wednesday, January 19

A Danger Demanding Sunshine — The Consequences of Hawaii’s Public Pension Shortfall

Tuesday, January 18

Hawaii’s Retirement System — A Danger Demanding Sunshine

Tuesday, January 11

Capitol Watch: Jan. 12

Friday, January 7

Hawaii’s 3 Growing Liabilities: Pensions, Health Care, Debt

July 2010

Friday, July 16

Week 11: Serious Financial Reporting Challenging

Monday, July 12

On the Hook – Part 2

Friday, July 9

Discussion: On the Hook

On The Hook – Part 1

Saturday, July 3

Q&A With Top State Pension Administrators

Top Pension Official: “We Have Taken the Steps to Catch Up”

June 2010

Tuesday, June 29

New Top Administrator for State Pension Fund

Friday, June 25

UPDATE: Top State Pension Administrators Sit Down with Civil Beat

Wednesday, June 23

UPDATE: Meeting Set With ERS

Thursday, June 17

Sizing Up Our State Pension Program

Wednesday, June 16

Discussion: Hawaii State Pension Fund