THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO THE HAWAII RETIREMENT SAVINGS PROGRAM.
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 savings plan that covers private sector workers who do not otherwise have access to a savings plan provided by their employer. Other states have similar programs including California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and Vermont.
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. Providing private sector employees with access to employer-sponsored retirement plans is a reliable way to promote savings needed for a secure retirement, improve economic mobility, and reduce wealth disparity.
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 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 establish a Hawaii retirement savings program for private sector employees.
SECTION 2. 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:
"Department" means the department of budget and finance.
"Director" means the director of finance.
"Employee" means a person employed by a private sector employer who is eligible to participate in the program established by this chapter.
"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, that has not offered to some or all of its employees 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, in the preceding five years; provided that the term shall not include the State or any political subdivision thereof or the United States.
"Program" means the Hawaii retirement savings program.
§ -2 Establishment of the Hawaii retirement savings program. (a) There is established the Hawaii retirement savings program to be administered by the department. 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;
(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 department;
(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 director;
(7) Whenever possible, use existing employer and public infrastructure to facilitate contributions to the program, recordkeeping, and outreach;
(8) Allow no 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 account owners at least annually;
(11) Allow account owners to maintain an account regardless of their place of employment and to 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 director 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) Keep administration fees in the program low to maintain a revenue neutral program over the long run;
(18) Allow the use of private sector partnerships to administer and invest the contributions to the program under the supervision and guidance of the department; and
(19) Allow employers to establish an alternative retirement program for some or all employees.
(b) The program, the department, the director, and the State shall not guarantee any rate of return or any interest rate on any contribution; provided that the program, the department, the director, and the State shall not be liable for any loss incurred by any person as a result of participating in the program.
§ -3 Duties of the director. The director shall:
(1) Establish, implement, and maintain the Hawaii retirement savings program pursuant to section -2;
(2) Direct the investment of the funds contributed to accounts in the program consistent with the investment restrictions established by the director; provided that the restrictions shall be consistent with the objectives of the program and the director 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 director;
(3) Collect application, account, or administrative fees to assist in the costs of administering the program;
(4) 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, including:
(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 department in its duties;
(5) Evaluate the need for, and procure as needed, pooled private insurance for the program; and
(6) Develop and implement an outreach plan to gain input and disseminate information regarding the program and retirement savings in general.
The director may enter into a management contract that shall include, at a minimum, terms requiring the financial organization to perform any of the duties required of the director under paragraphs (2) through (6).
§ -4 Rules. The department shall adopt rules, pursuant to chapter 91, necessary for the purposes of this chapter.
§ -5 Confidentiality. Individual account information for accounts under this program, including but not limited to names, addresses, telephone numbers, personal identification information, and amounts contributed, shall be confidential and shall be maintained as confidential:
(1) Except to the extent necessary to administer the program in a manner consistent with sections -2 to -7, the 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.
§ -6 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 fees and interest collected under this chapter;
(2) Appropriations made by the legislature to the fund; and
(3) Moneys transferred to the fund from the federal government, other state agencies, or local governments.
(b) Moneys in the Hawaii retirement savings program administrative fund shall be used to pay the administrative costs and expenses of the department and program and for any other purpose described in this chapter.
(c) The director shall be the treasurer and custodian of the administrative fund.
§ -7 Annual report. The department shall prepare an annual report detailing the department'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 3. 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 to be deposited into the Hawaii retirement savings program administrative fund.
SECTION 4. There is appropriated out of the Hawaii retirement savings program administrative fund 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 administrative and operating expenses of the Hawaii retirement savings program.
The sums appropriated shall be expended by the department of budget and finance for the purposes of this Act.
SECTION 5. This Act shall take effect on July 1, 2050; provided that sections 3 and 4 shall take effect on July 1, 2050.
Hawaii Retirement Savings Program; Private Sector Employees; Appropriation
Establishes a Hawaii Retirement Savings Program for private sector employees. Establishes the Hawaii Retirement Savings Program Administrative Fund. Requires the Department of Budget and Finance to prepare an annual report detailing the Department's activities for the previous fiscal year to the Governor and Legislature. Appropriates funds. Exempts employers if they offered a qualified retirement plan to some or all of its employees within the last five years. (SB1374 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.