HB 202: DLIR; Employment Security Law; Adequate Reserve Fund; Actuarial Study; Report

A BILL FOR AN ACT

RELATING TO THE ADEQUATE RESERVE FUND.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 383-63, Hawaii Revised Statutes, is amended by amending the definition of "adequate reserve fund" to read as follows:

     ""Adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.  "Remuneration", as used in this definition, means wages as defined in section 383-10.  For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive‑calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

     [Effective for the calendar years 1992 through 2007, and for calendar year 2011, "adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.

     Effective for the calendar years 2023 through 2030, "adequate reserve fund"] "Adequate reserve fund" means an amount that is equal to:

     (1)            , for calendar year 2026; and

     (2)            , for calendar year 2027 and thereafter,

times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year, but shall not include the benefit cost rate from June 2020 through August 2021."

     SECTION 2.  The department of labor and industrial relations shall conduct an actuarial study to determine whether an increase in the multiplier used to calculate the adequate reserve fund, as defined in section 383-63, Hawaii Revised Statutes, is necessary to maintain sufficient reserves in the unemployment compensation trust fund to pay unemployment insurance benefits.

     The department of labor and industrial relations shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2026.

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2050.

Report Title:

DLIR; Employment Security Law; Adequate Reserve Fund; Actuarial Study; Report

Description:

Amends the definition of "adequate reserve fund" by increasing the multiplier used to calculate its amount from the existing factor of 1, to unspecified amounts for calendar year 2026 and for calendar year 2027 and thereafter.  Requires the Department of Labor and Industrial Relations to conduct an actuarial study and report to the Legislature.  Effective 7/1/2050.  (SD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO THE ADEQUATE RESERVE FUND.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 383-63, Hawaii Revised Statutes, is amended by amending the definition of "adequate reserve fund" to read as follows:

     ""Adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.  "Remuneration", as used in this definition, means wages as defined in section 383-10.  For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive‑calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

     [Effective for the calendar years 1992 through 2007, and for calendar year 2011, "adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.

     Effective for the calendar years 2023 through 2030, "adequate reserve fund"] "Adequate reserve fund" means an amount that is equal to:

     (1)  One and one-quarter, for calendar year 2026; and

     (2)  One and one-half, for calendar year 2027 and thereafter,

times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year, but shall not include the benefit cost rate from June 2020 through August 2021."

     SECTION 2.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on July 1, 2050.

Report Title:

Employment Security Law; Adequate Reserve Fund

Description:

Amends the definition of "adequate reserve fund" by increasing the multiplier used to calculate its amount from the existing factor of one, to one and one-quarter for calendar year 2026 and one and one-half for calendar year 2027 and thereafter.  Effective 7/1/2050.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO THE ADEQUATE RESERVE FUND.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 383-63, Hawaii Revised Statutes, is amended by amending the definition of "adequate reserve fund" to read as follows:

     ""Adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.  "Remuneration", as used in this definition, means wages as defined in section 383-10.  For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

     [Effective for the calendar years 1992 through 2007, and for calendar year 2011, "adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.]

     [Effective for the calendar years 2023 through 2030, "adequate reserve fund"] "Adequate reserve fund" means an amount that is equal to:

     (1)  One and one-quarter, for calendar year 2026; and

     (2)  One and one-half, for calendar year 2027 and thereafter,

times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year, but shall not include the benefit cost rate from June 2020 through August 2021."

     SECTION 2.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on January 1, 3000.

Report Title:

Employment Security Law; Adequate Reserve Fund

Description:

Amends the definition of "adequate reserve fund" for calendar years 2026 and thereafter.  Effective 1/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to the adequate reserve fund.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Section 383-63, Hawaii Revised Statutes, is amended by amending the definition of "adequate reserve fund" to read as follows:

     ""Adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.  "Remuneration", as used in this definition, means wages as defined in section 383-10.  For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

     [Effective for the calendar years 1992 through 2007, and for calendar year 2011, "adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year.]

     Effective for the calendar years 2023 through 2030, "adequate reserve fund" means an amount that is equal to:

     (1)  One and one-quarter, for calendar years 2026 through 2027; and

     (2)  One and one-half, for calendar years 2028 through 2030,

times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year, but shall not include the benefit cost rate from June 2020 through August 2021."

     SECTION 2.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on January 1, 2026.

Report Title:

Employment Security Law; Adequate Reserve Fund

Description:

Amends the definition of "adequate reserve fund" for calendar years 2026 through 2028.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 1802

Honolulu, Hawaii

RE:    H.B. No. 202

       H.D. 1

       S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B. No. 202, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE ADEQUATE RESERVE FUND,"

begs leave to report as follows:

     The purpose and intent of this measure is to amend the Hawaii employment security law.

     More specifically, this measure amends the definition of "adequate reserve fund" by increasing the multiplier used to calculate its amount from the existing factor of one, to:

     (1)  One and one-quarter for calendar year 2026; and

     (2)  One and one-half for calendar year 2027 and thereafter.

     Your Committee received written comments in support of this measure from the Department of Labor and Industrial Relations.

     Your Committee received written comments in opposition to this measure from ABC Stores; ALTRES; Anna Miller's Restaurants; Armstrong Produce; The Chamber of Commerce of Hawaii; Grassroot Institute of Hawaii; Gyotaku Restaurants; Hawaii Automobile Dealers Association; Hawaii Energy Marketers Association; Hawaii Food Industry Association; Hawaii Restaurant Association; Il Gelato Hawaii; Japanese Chamber of Commerce and Industry of Hawaii; Maui Chamber of Commerce; NFIB Hawaii; Pets Pacifica, Inc.; Pop's Inc., d.b.a. Popeyes Louisiana Kitchen; Retail Merchants of Hawaii; Seal Masters of Hawaii; Society for Human Resource Management - Hawaii; Suisan; Tiki's Grill and Bar; Valley Isle Produce Inc., d.b.a. VIP Foodservice and Island Grocery Depot; Zippy's Restaurants; and five individuals.

     Your Committee received written comments on this measure from the Hawaii Bankers Association and Tax Foundation of Hawaii.

     Your Committee finds that the adequate reserve fund is a benchmark that is designed to ensure there are enough reserves in the unemployment compensation trust fund to pay unemployment insurance benefits.  The adequate reserve fund is used as a measure of the solvency of the unemployment compensation trust fund and to determine the unemployment insurance tax schedule.  The adequate reserve fund is calculated by multiplying the product of the highest benefit cost rate during the most recent ten-year period times the total wages paid for the last completed fiscal year by a certain factor.

     Your Committee also finds that the United States Department of Labor provided guidance that an adequate reserve fund multiplier of one and one-half times was the minimum necessary for the unemployment compensation trust fund to withstand a severe spell of unemployment.  However, in 2010, this multiplier was reduced to a factor of one, weakening the unemployment compensation trust fund's reserve balance and leaving it more vulnerable to crises.  Your Committee further finds that the surge in unemployment caused by the coronavirus disease 2019 pandemic rapidly depleted the unemployment compensation trust fund, forcing the State to borrow approximately $700,000,000 from the United States Department of Labor to pay out the claimed unemployment insurance benefits.  According to the Department of Labor and Industrial Relations, had the adequate reserve fund's multiplier factor not been reduced, the unemployment compensation trust fund would not have been as severely impacted.

     Your Committee has amended this measure by:

     (1)  Changing the multiplier used to calculate the adequate reserve fund to unspecified amounts; and

     (2)  Requiring the Department of Labor and Industrial Relations to conduct an actuarial study to determine whether an increase in the multiplier used to calculate the adequate reserve fund is necessary to maintain sufficient reserves in the unemployment compensation trust fund to pay unemployment insurance benefits.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 202, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 202, H.D. 1, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

STAND. COM. REP. NO. 1169

Honolulu, Hawaii

RE:    H.B. No. 202

       H.D. 1

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Labor and Technology, to which was referred H.B. No. 202, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE ADEQUATE RESERVE FUND,"

begs leave to report as follows:

     The purpose and intent of this measure is to amend the definition of "adequate reserve fund" by increasing the multiplier used to calculate its amount from the existing factor of one, to one and one-quarter for calendar year 2026, and one and one-half for calendar year 2027 and thereafter.

     Your Committee received testimony in support of this measure from the Department of Labor and Industrial Relations.

     Your Committee received testimony in opposition to this measure from the Hawaii Food Industry Association, Grassroot Institute of Hawaii, and Chamber of Commerce Hawaii.

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

     Your Committee finds that the adequate reserve fund serves as a benchmark to ensure that the Unemployment Compensation Trust Fund is sufficiently funded to pay unemployment insurance benefits in times of a severe spell of unemployment.  Your Committee further finds that an employer's unemployment insurance tax rate is computed once a year using two factors:  the employer's claim history, which is the unemployment insurance benefits paid out to the employer's former employees over the years; and the applicable unemployment insurance tax rate for the year.  The unemployment insurance tax rate for the year is calculated by dividing the current reserve balance of the Unemployment Compensation Trust Fund by the adequate reserve fund, which is determined by multiplying the highest benefit cost rate (the total amount of unemployment insurance benefits paid to unemployed individuals during a twelve consecutive month period divided by the total amount of wages paid by all employers) during the most recent ten‑year period by the total amount of wages paid by all employers during the last four calendar quarters, multiplied by a certain factor.  Therefore, a lower than appropriate multiplying factor will result in a lower amount of adequate reserve fund, which in turn will lower the unemployment insurance tax rate for employers and jeopardize the solvency of the Unemployment Compensation Trust Fund in times of significant increase in unemployment.

     Your Committee further finds that despite guidance from the United States Department of Labor that an adequate reserve fund multiplier of one and one-half times was the minimum necessary for the Unemployment Compensation Trust Fund to withstand a severe spell of unemployment, in 2010, the State reduced the multiplier to a factor of one, which negatively impacted the Unemployment Compensation Trust Fund's reserve balance.  Your Committee additionally finds that the unprecedented surge in unemployment due to the COVID-19 pandemic rapidly depleted the Unemployment Compensation Trust Fund, requiring the State to borrow approximately $700 million from the United States Department of Labor to pay out the claimed unemployment insurance benefits.  According to testimony, had the adequate reserve fund's multiplier factor remained at one and one-half times as initially set, the State would not have needed to borrow funds from the federal government.  This measure incrementally restores the original one and one-half multiplier in the adequate reserve fund's calculation, effectively increasing the required reserve amount to safeguard the long-term health of the Unemployment Compensation Trust Fund and by extension, the State's economy and social safety net.

     Your Committee has amended this measure by:

     (1)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     Your Committee notes the concerns expressed by local businesses that this measure will increase the unemployment tax rate, thereby raising operating costs and unduly burdening their finances.  Your Committee finds that this issue merits further consideration and respectfully requests that subsequent Committees to which this measure is referred consider this matter.

     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 H.B. No. 202, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 202, H.D. 1, S.D. 1, and be referred to your Committee on Ways and Means.

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

STAND. COM. REP. NO.  830

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 202

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 202, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE ADEQUATE RESERVE FUND,"

begs leave to report as follows:

     The purpose of this measure is to amend the definition of "adequate reserve fund" to specify the multipliers used in the calculation of the adequate reserve fund for calendar years 2026 and thereafter.

     Your Committee received comments on this measure from the Department of Labor and Industrial Relations and Tax Foundation of Hawaii.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 202, H.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  476

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 202

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Labor, to which was referred H.B. No. 202 entitled:

"A BILL FOR AN ACT RELATING TO THE ADEQUATE RESERVE FUND,"

begs leave to report as follows:

     The purpose of this measure is to amend the definition of "adequate reserve fund" to specify the multipliers used in the calculation of the adequate reserve fund for calendar years 2026 through 2030.

     Your Committee received testimony in support of this measure from Department of Labor and Industrial Relations.  Your Committee received comments on this measure from the Tax Foundation of Hawaii.

     Your Committee finds that it is important to ensure that the Unemployment Trust Fund has enough solvency to dispense unemployment insurance benefits, especially during times of economic crises.  Your Committee also finds that in 2007 the multiplier used to calculate the adequate reserve fund was changed from 1.50 percent to 1 percent, which resulted in inadequate reserves during the COVID-19 pandemic when unemployment was high, which further led to the Unemployment Reserve Fund having to borrow $700,000,000 from the United States Department of Labor to pay unemployment insurance benefits.  Your Committee believes that incrementally readjusting the multipliers to calculate the adequate reserve fund to 1.50 percent would strengthen the Unemployment Trust Fund against high unemployment rates during economic crises.

     Your Committee has amended this measure by:

     (1)  Using the multiplier of 1.25 percent only for calendar year 2026;

     (2)  Using the multiplier of 1.50 percent starting in calendar year 2027 and thereafter;

     (3)  Changing the effective date to January 1, 3000, to encourage further discussion; and

     (4)  Making technical, nonsubstantive amendments for the purposes clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 202, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 202, H.D. 1, and be referred to your Committee on Finance.

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