Hawaii House of Representatives Passes Auto Enrollment Bill for State IRA Program

Hawaii’s House of Representatives passed a bill last week that would require employers to automatically enroll employees in the Hawaii Retirement Savings Program—a feature that is currently not part of the state program. 

The Hawaii Retirement Savings Program, which provides retirement plan coverage for private-sector employees who do not already have access to employer-sponsored retirement plans, was established in July 2022 and did not require employees to be automatically enrolled. To participate in the program, employees would have to opt in.  

Additionally, unlike any other state with a similar program, one of the members of the board assigned to administer the program will be a retiree living in Hawaii, to represent the retirees.  

William Kunstman, co-chair of the Hawaii Retirement Savings Board, this month wrote in a letter to members of the state’s House Committee on Finance that “There is an urgent need to provide a viable option for private sector employers and workers to have access to a state-facilitated retirement savings plan.” 

Kunstman cited an employer survey conducted by the Hawaii Retirement Savings Task Force, which identified that the majority of small business owners agree that being able to offer a voluntary, portable retirement savings program would help local small businesses attract and retain quality employees and stay competitive. It also found that opt-out retirement plans increase participation rates as too few workers would otherwise invest savings for retirement. 

The board argued that without automatic enrollment, the program “may not be viable.” 

According to Kunstman, the board has not taken steps to conduct a feasibility study because it believes that it would fail to procure a vendor willing to conduct the study based on the fact that it is an “opt-in” program. In addition, the board believes its efforts to hire an executive director have been hindered by the current plan design.  

The House Committee on Finance recommended that the measure be passed with amendments.  

The bill made a housekeeping amendment to the definition of a “covered employer,” clarifying that this is any employer in business in the state and has one or more employees. The Senate disagreed with House amendments on Thursday, according to the state legislature. 

According to Kunstman, the bill now goes to conference committee deliberations for the chambers to possibly agree to a final version. 

For each enrolled employee in the program, a Roth IRA will be established into which contributions from an employee’s payroll will be deposited, according to Hawaii’s Department of Labor and Industrial Relations. Employees will own the contributions to, and earnings on, the amounts contributed to their IRAs under the program. 

The state will also match up to $500 to the accounts of the first 50,000 covered employees who have elected to participate in the program for 12 consecutive months after initial enrollment.  

The program is intended to be up and running by July 1, 2024.