Maui council hears ERS and EUTF status updates as budget season approaches

Thomas Williams, executive director of the Employees' Retirement System of the State of Hawaii, and Derek Mizuno, administrator of the Hawaii Employer-Union Health Benefits Trust Fund, briefed the Maui County Council Budget, Finance & Economic Development Committee on March 18 about each fund’s finances and implications for the county’s upcoming budget.

The ERS presentation outlined membership and funding trends that Williams said make the system “a mature plan.” He said ERS is about 63% funded with an unfunded actuarial liability of roughly $14 billion and that, with current assumptions and contributions, the system is projected to reach full funding in about 22 years. Williams described a multi-year, multimillion-dollar pension administration system upgrade now under way and highlighted recent legislative changes that shorten maximum amortization periods and otherwise affect long-term funding. “This is a multiyear project ... it’s a multimillion dollar effort,” Williams said.

Why it matters: ERS contributions and changes to benefit rules directly affect county payroll costs and long-term liabilities the county must budget. Committee members were focused on how temporary hazard pay settlements, benefit “spiking,” and proposed benefit changes could alter the county’s required contributions.

Key ERS details presented - Membership: roughly 58,000 active members statewide; about 6,900 active members and about 5,000 retirees reside in Maui County. - Funded status and trajectory: the ERS reported a 63% funded ratio and an unfunded actuarial liability of approximately $14 billion; ERS staff said the program is on track to be fully funded in 22 years under current assumptions. Williams noted that ERS’s asset allocation is more defensive than in the past to reduce downside risk, which can cause short-term underperformance versus market benchmarks but reduce losses in severe downturns. - Employer contributions: County employer contributions to the ERS were shown rising in the near term (roughly $66–68 million projected for fiscal-year 2025–26 in the presentation) before declining as unfunded liabilities are amortized. Williams described the effect of temporary hazard pay settlements on benefitable compensation and the plan’s liabilities. - Pension spiking: staff provided a one-year spike cost example for Maui County — the county was charged about $6.8 million in fiscal year 2024 for excess pension-spiking costs; speakers clarified that those are annual costs for incidents that year, not cumulative amounts. - Pending legislation: Williams summarized multiple bills affecting ERS (including administrative items and proposals to change vesting and benefit rules). He specifically referenced House Bill 1041 (noted in the briefing as aligning required minimum distribution language with IRS rules) and earlier acts that raised employer contribution rates (referred to in the presentation as Act 17) and a surcharge mechanism for excess spiking costs (Act 153). Williams said one bill to lower vesting for tier 2 employees from 10 to 5 years was estimated to have a small cost (presented as roughly 0.19% of payroll, shown as an approximate $273 million actuarial cost statewide).

EUTF briefing and county-level impact Derek Mizuno described recent operations and plan changes in the EUTF. He told the committee the EUTF adopted a new benefits administration system in 2022 that supports employer self-service for enrollment and that Maui County staff have been early adopters of electronic transmissions for hires and changes. Mizuno said the HMSA HMO plan will be closed to new enrollees on July 1, 2025, and explained the board’s decision to close that specific HMO because it had become the highest-cost plan despite being an HMO. “The HMSA HMO plan, it is being closed to new enrollees,” Mizuno said.

Mizuno also described an EUTF board decision to extend coverage of dependent children in retiree plans to match active-plan ACA coverage through age 26 (effective July 1, 2025), and he said the change will add cost to the active plan — estimated at about $1.3 million systemwide — though other formulary changes to drug benefits offset much of that cost in the EUTF actuarial projections. He presented the county of Maui’s funded ratio within the EUTF account (about 87.8% in the July 1, 2024 valuation) and noted that Maui County has been contributing more than the actuarially required contribution (ARC), a practice that EUTF staff said will allow the county to reach full funding around 2028. Projected required contributions drop substantially after the unfunded liability is extinguished, the presentation showed.

Committee response and next steps Committee members asked detailed questions about drop plans for police and fire, the mechanics and budgetary effects of employer prepayments, pension spiking drivers, and how the ERS and EUTF investment strategies seek to protect retirees during inflationary or recessionary periods. Williams and Mizuno said they would be available to answer follow-up questions and provide additional comparative projections; both presenters repeatedly noted that legislative activity could change plan costs and timelines.

The committee chair deferred formal action on the presentations and directed staff to use the information in preparing the county budget work sessions scheduled before the council’s budget hearings. No votes were taken on policy changes.

Ending: The ERS and EUTF updates will be used as reference materials during the council’s budget deliberations; committee members asked staff to follow up with additional requested analyses and for ERS/EUTF to return with further details if needed.