STAND. COM. REP. NO.142-02
RE: H.B. No. 1697
Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twenty-First State Legislature
Regular Session of 2002
State of Hawaii
Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 1697 entitled:
"A BILL FOR AN ACT RELATING TO PENSION PLANS,"
begs leave to report as follows:
The purpose of this bill is to encourage the use of employer-sponsored 401(k) plans and 408A, or Roth Individual Retirement Accounts (Roth IRAs), by including these plans in the list of pension plans protected from attachment, execution, seizure, and operation of bankruptcy or insolvency laws under state law.
Testimony in support of this bill was received from the House Representative of the 11th District.
Your Committee finds that 401(k) and 408A plans are sound financial tools for retirement planning. 401(k)s are employer-sponsored qualified plans that allow more than ten percent of assets to be invested in employer stock. A 401(k) plan is in most cases safe from the claims of creditors because it falls under Title I of the Employee Retirement Income Security Act of 1974 (ERISA). Although ERISA's protections preempt state law, your Committee has retained the reference to 401(k) plans for uniformity between state and federal law, and to provide state protection under the rare circumstances where a 401(k) plan is not protected by ERISA.
Your Committee further finds that where state law protects traditional IRAs that fall under IRC section 408 from bankruptcy and insolvency laws, state law does not include a reference to the Roth IRA, which falls under 408A, a different IRC section. It is possible that Roth IRAs fall within the category of traditional section 408 IRAs, and legal arguments abound as to whether a reference to IRC section 408 within pension money exemption statutes encompasses Roth IRAs. It is the intent of your Committee to remove any ambiguity from our pension money exemption statute in favor of protecting Roth IRAs from the claims of creditors.
Your Committee has amended this bill by making nonsubstantive, technical amendments for purposes of clarity and consistency.
As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1697, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1697, H.D. 1, and be referred to the Committee on Finance.
Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,
KENNETH T. HIRAKI, Chair