HOUSE OF REPRESENTATIVES
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII
A BILL FOR AN ACT
relating to retirement savings.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that there is an imminent retirement security crisis in the State, as many individuals do not have access to an employer-sponsored retirement plan. Individuals without a retirement plan are at significant risk of not having enough retirement income to meet basic expenses during retirement. A retirement savings plan can help employees achieve economic security, improve economic mobility, and reduce wealth disparity.
In 2017, Oregon was the first state to implement a retirement saving plan that covers private sector workers who do not otherwise have access to a savings plan provided by their employer. With many small businesses operating in Oregon, the state calculated that it had more than one million employers who did not offer any form of retirement savings. The plan was actually adopted earlier in 2015, as the Obama administration tried to encourage states to promote retirement savings. Other states, including California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and Vermont, have similar programs.
The legislature also finds that individuals need a lifelong savings system that provides them with the opportunity to build their assets and attain future financial stability. Private sector employees with access to employer-sponsored retirement plans have a reliable way to accumulate savings needed for a secure retirement. However, the legislature further finds that approximately fifty per cent of the State's private sector employees work for an employer that does not offer a retirement plan or are not eligible for the plan offered. The lack of opportunity to participate in an employer-provided retirement plan spans all levels of education and earnings. Employees of Hawaii businesses with fewer than one hundred employees are less likely to have access to a retirement plan than employees of larger businesses. Employees who are offered the opportunity to save through the employee's place of employment are significantly more likely to participate and make steady contributions to build retirement savings.
The purpose of this Act is to require the legislative reference bureau to:
(1) Conduct a study on the feasibility of implementing a Hawaii retirement savings program for private sector employees;
(2) Report to the legislature with its findings and proposals, if any; and
(3) If the results of the study support it, to establish a Hawaii retirement savings board to administer the Hawaii retirement savings program for private sector employees.
SECTION 2. (a) Before establishing the Hawaii retirement savings board and the Hawaii retirement savings program pursuant to section 3 of this Act, the legislative reference bureau shall conduct a feasibility study by:
(1) Conducting a market analysis to determine:
(A) The feasibility of the Hawaii retirement savings program; and
(B) Whether and to what extent plans or programs with the characteristics described in section -4, Hawaii Revised Statutes, currently exist in the private market;
(2) Obtaining legal advice regarding the applicability of the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended, to the Hawaii retirement savings program;
(3) Investigating whether employers that are not required to participate in the Hawaii retirement savings program can make the program available to their employees;
(4) Investigating methods to allow individuals who are not automatically enrolled in the Hawaii retirement savings program to opt in to the program and make contributions to an account, either through payroll contributions or another method of contribution;
(5) Conducting an analysis of the potential costs to employers, including administrative costs, and costs associated with providing automatic payroll deductions for participation in the Hawaii retirement savings program, as well as making recommendations on how to eliminate or reduce those costs through incentives, tax credits, or other means;
(6) Examining the potential effects of a state-run retirement savings plan or program for private employees on the private market;
(7) Examining other states with other voluntary, market-based retirement savings plans or programs, including New Jersey and Washington;
(8) Preparing a timeline for implementation of the Hawaii retirement savings program; and
(9) Making recommendations to the legislature regarding ways to increase financial literacy in the State.
The legislative reference bureau may issue a request for proposals for a third party to conduct the market analysis pursuant to paragraph (1).
(b) A preliminary report, including any proposed legislation, shall be submitted to the legislature no later than twenty days prior to the convening of the regular session of 2020, and a final report, including any proposed legislation, shall be submitted to the legislature no later than twenty days prior to the convening of the regular session of 2021.
SECTION 3. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
hawaii retirement savings pROGRAM
§ -1 Definitions. As used in this chapter, unless the context otherwise requires:
"Board" means the Hawaii retirement savings board.
"Employee" means a person who is eligible to participate in the program established pursuant to section -4.
"Employer" includes any individual, partnership, association, joint-stock company, trust, corporation, the personal representative of the estate of a deceased individual or the receiver, trustee, or successor of any of the same, employing any person, but shall not include the State or any political subdivision thereof or the United States.
"Program" means the Hawaii retirement savings program.
§ -2 Hawaii retirement savings board; establishment. (a) There is established within the department of budget and finance for administrative purposes the Hawaii retirement savings board.
(b) The board shall consist of the following eleven members:
(1) The director of finance or the director's designee;
(2) The director of commerce and consumer affairs or the director's designee;
(3) The comptroller or the comptroller's designee;
(4) A member of the senate to be selected by the president of the senate;
(5) A member of the house of representatives to be selected by the speaker of the house of representatives;
(6) A representative of the employees' retirement system to be selected by the governor pursuant to section 26‑34;
(7) A representative of a chamber of commerce representing a variety of business interests in the State to be selected by the governor pursuant to section 26-34;
(8) Two members from the small business industry to be selected by the governor pursuant to section 26-34; and
(9) Two representatives of the community, one to be selected by the president of the senate and one to be selected by the speaker of the house of representatives.
(c) The representative of the employees' retirement system, the representative of the chamber of commerce, the members from the small business industry, and the representatives of the community shall serve terms of years; provided that the members shall serve no more than consecutive terms. The senate member shall serve at the pleasure of the president of the senate. The member of the house of representatives shall serve at the pleasure of the speaker of the house of representatives. All other members shall serve in an ex officio capacity.
(d) The members of the board shall serve without pay but shall be entitled to reimbursement for necessary expenses, including travel and board and lodging expenses, while attending meetings of the board or when engaged in business relating to the work of the board.
(e) The director of finance or the director's designee shall serve as chairperson of the board.
(f) The board may employ, without regard to chapter 76, staff necessary for the performance of its functions and fix their compensation.
§ -3 Duties of the board. The board shall:
(1) Establish, implement, and maintain the program established pursuant to section -4;
(2) Adopt rules pursuant to chapter 91 for the general administration of the program in accordance with section ‑5;
(3) Direct the investment of the funds contributed to accounts in the program consistent with the investment restrictions established by the board; provided that the restrictions shall be consistent with the objectives of the program and the board shall exercise the judgment and care then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs with due regard to the probable income and level of risk from certain types of investments of money, in accordance with the policies established by the board;
(4) Collect application, account, or administrative fees to defray the costs of administering the program;
(5) Make and enter into contracts, agreements, or arrangements, and retain, employ, and contract for any of the following services considered necessary or desirable for carrying out the purposes set forth by this chapter:
(A) Services of private and public financial institutions, depositories, consultants, investment advisers, investment administrators, and third-party plan administrators;
(B) Research, technical, and other services; and
(C) Services of other state agencies to assist the board in its duties;
(6) Evaluate the need for, and procure as needed, pooled private insurance for the program; and
(7) Develop and implement an outreach plan to gain input and disseminate information regarding the program and retirement savings in general.
§ -4 Establishment of the Hawaii retirement savings program. (a) There is established the Hawaii retirement savings program to be administered by the board. The program shall:
(1) Allow employees in the State to contribute to an account established under the program through payroll deduction;
(2) Require an employer to offer its employees the opportunity to contribute to an account in the program through payroll deductions unless the employer offers a qualified retirement plan, including but not limited to a plan qualified under section 401(a), section 401(k), section 403(a), section 403(b), section 408(k), section 408(p), or section 457(b) of the Internal Revenue Code of 1986, as amended;
(3) Provide for automatic enrollment of employees and allow employees to opt out of the program;
(4) Offer a default contribution rate set by the board;
(5) Offer default escalation of contribution levels that can be increased or decreased within the limits allowed by the Internal Revenue Code of 1986, as amended;
(6) Provide for contributions to accounts in the program to be deposited directly with the investment administrator of the program;
(7) Whenever possible, use existing employer and public infrastructure to facilitate contributions to the program, recordkeeping, and outreach;
(8) Prohibit any employer contributions to employee accounts;
(9) Have its records and its program accounts maintained and accounted for separately;
(10) Provide reports on the status of program accounts to program participants at least annually;
(11) Allow account owners to maintain an account, regardless of their place of employment, and roll over funds into other retirement accounts;
(12) Pool accounts established under the program for investment;
(13) Be professionally managed;
(14) Provide that the State and employers that participate in the program have no proprietary interest in the contributions to or earnings on amounts contributed to accounts established under the program;
(15) Provide that the investment administrator for the program shall be the trustee of all contributions and earnings on amounts contributed to accounts established under the program;
(16) Not impose on employers any duties that are otherwise prohibited under the Employee Retirement Income Security Act of 1974, as amended;
(17) Minimize program administration fees;
(18) Allow the use of private sector partnerships to administer and invest the contributions to the program under the supervision and guidance of the board; and
(19) Allow employers to establish an alternative retirement program for some or all employees.
(b) The program, the board, each board member, and the State shall not guarantee any rate of return or any interest rate on any contribution; provided that the program, the board, each board member, and the State shall not be liable for any loss incurred by any person as a result of participating in the program.
§ -5 Rules. The board shall adopt rules, pursuant to chapter 91, necessary for the purposes of this chapter.
§ -6 Confidentiality. Individual account information for accounts under this program, including but not limited to names, addresses, telephone numbers, personal identification information, or amounts contributed, shall be confidential and maintained as confidential:
(1) Except to the extent necessary to administer the program in a manner consistent with this chapter, the applicable tax laws of the State, and the Internal Revenue Code of 1986, as amended; or
(2) Unless the person who provides the information or is the subject of the information expressly agrees in writing that the information may be disclosed.
§ -7 Hawaii retirement savings program administrative fund. (a) There is established in the state treasury a special fund to be known as the Hawaii retirement savings program administrative fund, into which shall be deposited:
(1) All interest collected under this chapter on and after the establishment of the program;
(2) Appropriations made by the legislature to the fund;
(3) All fees collected pursuant to section -3; and
(4) Moneys transferred to the fund from the federal government, other state agencies, or local governments.
(b) The director of finance shall be the treasurer and custodian of the special fund.
(c) Moneys in the special fund shall be used to pay the administrative costs and expenses by the board and program and for any other purposes to implement this chapter.
§ -8 Annual report. The board shall prepare an annual report detailing the board's activities for the previous fiscal year. The annual report shall be submitted to the governor and legislature no later than twenty days prior to the convening of each regular session."
SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2019-2020 and the same sum or so much thereof as may be necessary for fiscal year 2020-2021 for the legislative reference bureau to conduct the market analysis under section 2(a)(1) of this Act.
The sums appropriated shall be expended by the legislative reference bureau for the purposes of this Act.
SECTION 5. This Act shall take effect on July 1, 2019; provided that:
(1) Subject to a positive finding in the feasibility study pursuant to section 2 of this Act, the Hawaii retirement savings board established pursuant to section 3 of this Act shall establish the Hawaii retirement savings program so that individuals may begin making contributions to the program no later than July 1, 2021;
(2) If the legislative reference bureau determines that the program would qualify as an employee benefit plan under the Employee Retirement Income Security Act of 1974, as amended, the Hawaii retirement savings board and Hawaii retirement savings program shall not be established; and
(3) No employer with a retirement plan or program for their employees shall cancel their retirement plan or program for years from the effective date of this Act.
Kupuna Caucus; Hawaii Retirement Savings Program; Hawaii Retirement Savings Board; Feasibility Study; Legislative Reference Bureau; Appropriation
Requires the legislative reference bureau to conduct a feasibility study to determine the feasibility of establishing a Hawaii retirement savings program. Subject to a positive finding in the feasibility study, establishes the Hawaii retirement savings board to establish, implement, and maintain the Hawaii retirement savings program to cover private sector employees who are not provided a retirement savings plan by their employers. Appropriates funds to the legislative reference bureau to conduct a market analysis. Prohibits employers that offer retirement savings plans or programs to employees from canceling these plans or programs for an unspecified number of years after July 1, 2019.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.