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Hawaii May Say Aloha to Unique Auto-IRA Plan


The Aloha state is poised to set in motion a state retirement plan that would be unique among its counterparts—employees would have to opt in, and a retiree would be among the members of the board administering the program. 

On May 3, the Hawaii Senate and House of Representatives both voted in favor of S. 3289, a bill that would establish the Hawaii Retirement Savings Program, a state-run retirement plan for employees in the state whose employers do not provide one. The measure passed the Senate unanimously; in the House there was only one dissenting vote. 

About the Plan 

The Hawaii Retirement Savings Program would be a state-facilitated payroll-deduction retirement savings plan for private-sector employees in Hawaii who do not have access to employer-sponsored retirement plans.

An unusual feature of the program is that employees are not automatically registered, with the option to opt out of they wish to do so. The Hawaii program would require employees to take the affirmative step of opting in in order to participate. 

The program would establish for each enrolled employee a Roth IRA, into which the contributions deducted from an employee's payroll would be deposited. The Hawaii Retirement Savings Board may add an option for all participants to affirmatively elect to contribute to a traditional IRA in addition to a Roth IRA. Employees will own the contributions to, and earnings on, the amounts contributed to their IRAs under the program.  

The default contribution amount deducted from the payroll of a covered employee who has elected to contribute to the program would be equal to 5% of the covered employee's salary or wages. However, employees may elect 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 would 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.

Employers would not make contributions, whether matching or not, to the employees’ accounts.

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. 

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

About the Board 

The measure provides for the creation of the Hawaii retirement savings board to implement and administer the program. The board would 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.
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. 

Next Steps 

After enactment, the measure authorizes an implementation and evaluation study, followed by the creation of an implementation strategy and timetable.

All comments
Brian Gordon
1 year 3 weeks ago
Come on guys, that headline might mean they're *eliminating* such a program just as much, no?