What Types of Hawaii State Pensions are offered?
Because of its smaller population from other US states, Hawaii only has one administered state pension plan, the Employees’ Retirement System. The pension plan is offered for all state employees, and special categories of government employees have some additional benefits requirements. There are also no state-administered local pension plans, meaning that every government employee must enroll in the ERS plan.
Along with the normal contributory plan options, Hawaii state employees may enroll in a hybrid plan that requires 8% contribution of monthly salary and additional investment opportunities. This plan allows for more control over the investment of an employee’s pension plan.
As of 2013, the Hawaii state pension fund is funded at a level of 59.4%, which was actually a slight decrease from the 60% level of 2012. This funding ratio ranks among the lowest of all the US states and was flagged as cause for concern by the Pew Center for the States. As it is the only pension program available to state employees, there has been much recent debate about reforming the pension plan contribution system in a way that will salvage solvency for future employees.
Contributory Plan Eligibility and General Benefits
The main plan offered to all state employees is the contributory plan, which is mandatory for all full-time employees.
Employees hired prior to July 1, 2012 must contribute 7.8% of their monthly salary, pre-tax. All other employees must contribute 9.8% of their monthly salary, pre-tax.
Employers match these employee contributions with an additional 15% in monthly contributions. The total contributions are subject to a compounded interest rate of 2.4% – 4%.
Members who were hired prior to July 1, 2012 may retire at the age of 55 with at least 5 years of service credit. Members with at least 25 years of service credit may apply for early retirement at any age.
All other members may retire at the age of 60 with at least 10 years of service credit. However, members may apply for early retirement at age 55 if they have attained at least 25 years of service credit.
The standard vesting requirement is 10 years of service credit. Members who were hired prior to July 1, 2012 vest after attaining 5 years of service credit.
Monthly retirement benefit is calculated from a formula based on retirement age, years of service credit, and average annual compensation.
After retirement, employees are entitled to a 1.5% annual increase in monthly retirement benefit for cost of living expenses. There is no limit on this increase, and it accrues every July.
Employees who leave employment after attaining vesting status may still receive their monthly retirement benefit once they reach retirement age. Employees who leave employment prior to vesting status may receive a 100% refund of their contributions and interest if they do not intend to return to government service within 4 years.
Service Credit Requirements
Generally, service credit is calculated based on time worked per month. If at least 15 days are worked in a calendar month, that is categorized as one month of service credit.
Employees may also convert part-time service into service credit under the ERS system. For example, 12 months of part-time service would convert into 6 months of full-time service credit.
Service credit may be purchased under a variety of situations as determined by the Pension Board. These include:
- Active military service
- Approved maternity leave
- Approved leave of absence for professional reasons
- Past service accrued under a different state agency, but not previously credited under the ERS
Employees forfeit all of their service credit if there is a gap in state employment that is more than 4 years long. Employees may return to state employment within the 4 year time limit to restore previously-earned service credit.
In the event of an employee’s death that is not related to work, that employee’s beneficiaries will receive a reduced monthly retirement benefit, as well as a portion of that employee’s monthly salary (provided the employee has worked for at least one year.) This benefit is calculated based on the length of the employee’s tenure at the time of death.
In the event of a work-related death, the employee’s beneficiaries will receive both a reduced monthly retirement benefit and a monthly benefit equal to one-half of the employee’s average compensation.
Employees who experience a job-related disability are entitled to immediate disability benefits for the duration of their rehabilitation.
Employees who experience a disability unrelated to their work may collect lifetime disability benefits if they have attained at least 10 years of service credit. This benefit is determined by the Pension Board based on years of service.
Special Categories of Pension Plan
There are several special categories that fall under the overall umbrella of the Hawaii ERS. These categories are eligible for different benefit requirements, though their pension plan is still governed by the ERS.
- Police officers, firefighters, and public safety officers contribute 12.2% – 14.2% of their monthly salary, depending on their hire date. Employers match these contributions at a rate of 15% – 19.7%. These members are still entitled to the same normal retirement ages and vesting requirements. The job-related disability payment for police officers, firefighters, and public safety officers is an immediate refund of all retirement contributions and lifetime pension equal to one-half of the employee’s monthly compensation.
- Judges contribute 7.8% – 9.8% of their monthly salary, depending on their hire date. Judges are entitled to the same normal retirement ages, vesting requirements, and retirement benefits as other ERS members.
- Elected officials contribute 7.8% – 9.8% of their monthly salary, depending on their election date. Elected officials may choose to opt out of the ERS pension plan on a one-time basis. Elected officials are entitled to the same normal retirement ages, vesting requirements, and retirement benefits as other ERS members.
For more information about the specific requirements and circumstances of the above-mentioned government categories, contact the Employees’ Retirement System of the State of Hawaii.