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Hawaii to Establish Unique Retirement Program

Legislation

Hawaii has joined the states that provide retirement plan coverage for private-sector employees whose employers do not offer one—and with a twist. Gov. David Ige (D) signed legislation creating the program into law on July 12. It went into effect immediately. 

The program has two unique features. Employees will not be automatically registered, with the option to opt out. In order to participate in the program, employees will have to opt in. And unlike any other state so far, one of the members of the board that will administer the program will be a retiree living in Hawaii, to represent retirees. 

About the Program

On May 3, the Hawaii Senate and House of Representatives passed S. 3289, the bill that would establish the program. The Senate passed it unanimously; there was only one dissenting vote in the House. 

The Hawaii Retirement Savings Program will be a state-facilitated payroll-deduction retirement savings plan. Through the program, for each enrolled employee a Roth IRA will be established into which contributions deducted from an employee's payroll will be deposited. Employees will own the contributions to, and earnings on, the amounts contributed to their IRAs under the program.  

Contributions. The default contribution amount deducted from the payroll of a covered employee who has elected to contribute to the program will be equal to 5% of the covered employee’s compensation. Employees may elect, however, to contribute a higher or lower percentage of compensation as long as the amount does not exceed the applicable contribution dollar limits under the Internal Revenue Code. Employers will not make contributions to the employees’ accounts.

State Match. The measure also provides for a state match of up to $500 to the accounts of the first 50,000 covered employees who participate in the program for 12 consecutive months after initial enrollment. 

Employers. Employers will be required to: 

  • provide covered employees with written notice that they may opt in to the program;
  • withhold covered employees’ contribution amount from their salary or wages; and
  • transmit covered employees’ payroll deduction contributions to the program on the earliest date the amount withheld can reasonably be segregated from covered employees’ assets, but no later than the 15th day of the calendar month following that in which the covered employees’ contribution amounts are withheld.

Administration. The program will be administered by the Hawaii Retirement Savings Board, in consultation with the Department of Labor and Industrial Relations and Department of Budget and Finance.

The board will have nine members:

  • Two ex officio voting members who would serve as the co-chairs: (1) the director or the director’s designee; and (2) the director of finance or the director’s designee;
  • Two ex officio nonvoting members: (1) a member from the Hawaii House of Representatives, appointed by the Speaker of the House; and (2) a  member from the state Senate, appointed by the President of the Senate. 
  • Five voting members appointed by the governor:

1. One with professional knowledge of establishing retirement plans and retirement investment products.
2. One from the small business community.
3. One with professional knowledge and expertise in representing the interests of employers concerning retirement savings.
4. One with professional knowledge and expertise in representing the interests of employees concerning retirement savings. 
5. One who is a retiree living in Hawaii, to represent retirees. 

Implementation. The board may determine the time frame for developing and implementing the program. Before it implements the program, the board may conduct a detailed implementation and evaluation study and perform other due diligence tasks to determine the feasibility of the program parameters established by this chapter and the resources and time needed to implement the program. The board is to report its findings and recommendations to the legislature after the study is complete.