Unions fighting new law on state pension fund
By John Duchemin
Advertiser Staff Writer
Hawai'i's police and teachers unions are seeking to halt a pending law that would streamline the state Employees' Retirement System but has caused a wave of unwanted retirements over fears that the changes will hurt retirees' pensions.
The State of Hawai'i Organization of Police Officers and the Hawai'i State Teachers Association said yesterday that they plan to sue for a court injunction to prevent the law, passed as Act 128 in the recent legislative session, from taking effect in January.
Because of the unions' concerns, the pension fund's board of trustees yesterday voted to recommend legislation that would repeal a controversial new method of calculating pension payments allowed by Act 128.
The act would speed the way the retirement system, which oversees benefits for more than 90,000 state employees, retirees and beneficiaries, processes benefits and is designed to help save money and eliminate the system's nearly two-year backlog in calculating retirees' final pensions.
But union leaders said the law's simplification of the pension payment calculation, among the most complex in the United States, and a requirement that employees retire only on the first day of each month will cause many retirees to lose hundreds of dollars each month in payments.
"We understand the reasons for the law, but there are flaws in it that will hurt our members," said Tenari Ma'afala, president of the police officers' union.
Ma'afala said senior officers are retiring in unprecedented numbers from the police force in an effort to avoid having their benefits calculated in the new way. Ma'afala said the 2,000-employee Honolulu Police Department, stretched thin by a shortage of officers, has seen 91 of 180 eligible officers file for retirement this year, up from an average of about 50 per year.
ERS currently lets retirees draw a pension based on the best three 12-month periods of pay during their employment by the state or local governments. The 12-month periods don't have to be consecutive, and they don't have to start with January. This method lets employees collect a relatively high pension, but it's also complicated.
Pension fund administrator David Shimabukuro said that it takes a computer 15 minutes to figure out pension calculations for each employee and that the staff must spend many extra hours researching each retiree's benefit application.
The complexity has contributed to a logistical logjam at ERS, in which thousands of retirees have been forced to subsist for years on estimated benefits while their final payment amounts are calculated.
Under the new law, employees can choose to base their pensions either on their three highest-paying calendar years, or on the three years immediately preceding their retirement dates.
"The whole intent is to streamline the process, because we have the most complex system in the nation," Shimabukuro said. "We want to use the best practices."
But police union officials said many officers stand to lose thousands of dollars each year, partly because pay tends to rise and fall irregularly with overtime, hazardous duty, night duty and undercover work.
"The new way really won't capture that," said Vladimir Devens, attorney for the police union. "Police are not typical employees, they don't work 9-to-4 shifts."
At their board meeting yesterday, ERS trustees agreed with the police union's arguments and voted to lobby the Legislature to overturn the new calculation method and maintain the existing one.
"Our intent was never to reduce the benefits that employees get," trustee Darwin Hamamoto said. "Going back to the old way may be the only thing to do, even if it takes longer."
Teachers are upset with a different part of the new law, which will require many to go without pay for about two weeks if they retire at the school year's end in mid-June. Current laws let teachers collect retirement pay as soon as they quit work. But Act 128's prohibition on mid-month retirements, would require them to wait until July 1 to begin collecting their pensions.
"This group of people will have to pay for the ERS' increases in efficiency," said Joan Husted, executive director of the teachers' union.
Shimabukuro said this method is common among retirement systems, including Social Security, and saves time because the system won't have to pro-rate benefits to reflect the first partial month.
"If you retire on the first, it makes it much easier for us to process," he said.
The unions hope a state judge will grant their request for an injunction against Act 128, which would give them time to lobby legislators and ERS trustees to scale back the changes allowed under the law.
Devens, the police union attorney, said the request for an injunction has not yet been filed but that the union has no other choice. Husted said the teachers would join the filing by SHOPO.
"What we hope is that the law can be frozen until we can all put our heads together and come up with a solution," SHOPO's Ma'afala said.
Reach John Duchemin at jduchemin@honoluluadvertiser.com or at 525-8062.
