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July 19, 2011 Page - 3 - B. Wesley Machida, Employee Retirement System Handouts made available. The last one in particular is good information. We are in a difficult funded position at 61.4%. We have active employees (65,000), retirees and beneficiaries (40,000) who receive pension benefits. At end of this FY we will be paying nearly $1 B in benefits to these 2 groups. We also have 6000 inactive vested members. They are not yet drawing benefit until they reach retirement age. We need money to pay these benefits and need over $18B. Currently have $9.8B. Shortfall is what's known as unfunded liability at about 39%. $1.687B was credited back to employers in the period 1967 to 2003 as excess investment earnings. Had those funds stayed in the fund we would be nearly 100% funded today. Contributions by state law is a percentage of payroll including OT, supplementary, anything considered compensation. Police & Fire is 19.7%. All other employees contribution rate is 15%. FY2011 estimate is $537M statewide contribution. Employee contribution is $170M and we pay out $1B in benefits. We will need to liquidate $240M in investment assets to make the benefit payments. 2011 may get worse because we have deferred loses we've yet to recognize from 2009-10. Return rate assumption is 10% but had an 18% loss in those years. We use a 4 year smoothing effect to make up the difference. To help the situation there were 2011 legislative initiatives passed. One limits increases, 2 help to keep the tax exempt status. Another changes the vesting of benefit to new employees on July 1 , 2012 or later. Those who left government and not vested then come back would be considered a new hire. Mr. Machida proceeded to answer detailed questions from the audience. C. Communication (dated April 13, 2011) from Honolulu City Council Chair Nestor Garcia designating Councilmember Stanley Chang as their HSAC representative and Councilmember Tulsi Gabbard Tamayo as alternate for the term July 1 , 2011 through June 30, 2012. D. Communication (dated April 13, 2011) from Honolulu City Council Chair Nestor Garcia requesting consideration for appointing Councilmember Tulsi Gabbard Tamayo to the NACo Economic Development Steering Committee for the term July 1, 2011 through June 30, 2012. E. Communication (dated April 26, 2011) from Kauai County Council Chair Jay Furfaro, informing President Rapozo of the representatives and appointees for the council approved with respect to HSAC and NACo and also approving HSAC annual operating budget for FY2011-2012. F. Discussion on Maui County selection of representatives and appointees to HSAC Executive Committee for the term July 1 , 2011 through June 30, 2012.