Legislation that would shift the Hawaii Retirement Savings Program from one requiring employees to opt in if they want to participate to one in which they instead would be automatically enrolled and would have to opt out if they do not want to participate has the imprimatur of a Senate committee.

That’s unanimous imprimatur, actually — the Finance Committee of the Hawaii Senate recommended that SB 855 be passed without amendment in a 14-0 vote on April 1.

Assistant Majority Whip Henry Aquino (D-Waipahu) introduced SB 855 on Jan. 17, a measure that would amend the Hawaii Retirement Savings Program, the program out in place to provide retirement plan coverage to private-sector employees in Hawaii whose employers don’t have a plan of their own in place.

SB 855 would clarify the definition of "covered employer" under the Hawaii Retirement Savings Act by requiring that covered employers automatically enroll covered employees into the Hawaii Retirement Savings Program unless the covered employee chooses to opt out. It also would repeal the limit on the total fees and expenses that can be spent for the program each year. It also would appropriate funds to the Department of Labor and Industrial Relations for the development and operation of the program. Rep. Jackson Sayama (D-St. Louis Heights) introduced HB 847, the House of Representatives version of S. 855, on Jan. 23.

Being Heard

The Finance Committee held a public hearing on SB 855 on April 1.

Kale Lopez, State Director for AARP Hawaii, in her in-person testimony, called it a “problem” that the Hawaii Retirement Savings Act, the measure that creates the Hawaii Retirement Savings Program, requires people to opt in to the program. “There’s no employer-funded program where you have your employees easily opting in if you want to help them save for retirement,” Lopez said, adding that such an approach enables employees to acknowledge that while the program makes it easy for them to save, but allows them to fall prey to the feeling that they “don’t want to.”

Lopez indicated to the committee that an opt-out approach will yield better results, testifying that “across the country, the opt-out program has demonstrated at least 80% of employees who are offered the program choose to actually save.”

In Writing

Caroline Cadirao Director, Executive Office on Aging (EOA) — an agency that is part of the Hawaii Department of Health — quantified the possible impact of the program, testifying that it “will help about 173,000 private sector workers save money for retirement.”

Like Lopez, Cadirao endorsed the opt-out approach, writing that “automatic enrollment in a retirement savings program is considered a ‘best practice’ in the industry and will enable more employees to save for their future.” She added that approach also will allow employees to make informed decisions and “make proactive choices about their financial future.”

Not only does “opt-out” boost participation, suggested Gary Simon, a member of the Policy Advisory Board for Elder Affairs (PABEA) — an appointed board that advises the EOA — it also results in higher overall contribution rates than those seen in plans for which enrollment is voluntary.

“Automatic enrollment of employees into the program is critical to the feasibility of the program,” wrote Brian Taniguchi, a member of the Hawaiʻi Retirement Savings Board, the body that administers the Hawaii Retirement Savings Program. Lopez struck a similar tone, writing, “it is critical now that the proposed amendments in S.B. 855, SD1, HD1 are adopted by the legislature to ensure the success of the Hawaii Retirement Savings Program.”

Small Business Concerns

Taniguchi reported that in a survey Hawaii Retirement Savings Task Force conducted, many small business owners agreed that “being able to offer a voluntary, portable retirement savings program would help local small businesses attract and retain quality employees and stay competitive.”

Tina Yamaki, President of the Retail Merchants of Hawaii, had a different take on the effect of the measure on small businesses. She said her organization is concerned that the change in enrollment approach could increase burdens on small businesses.

“Implementing and managing such programs incurs ongoing costs for businesses, particularly challenging for those with high turnover rates, such as customer service roles. Whether managed internally or through third-party services, the financial strain is considerable, with additional expenses incurred to opt employees in and out of the program,” Yamaki said in her written testimony.

Pamela Tumpap, President of the Maui Chamber of Commerce, expressed a similar view. That chamber, she said, supported the Hawaii Retirement Savings Act when the “because we understand the importance of retirement savings” and that they “greatly appreciated that the program required employees to opt in, as it reduced the burden on businesses.” But implementing and managing a program in which employees instead opt-out, she said, would incur costs on small businesses which she said “can be particularly challenging for those with high turnover rates, such as in customer service roles.”

The Bottom Line

“To secure their finances, retirees must have sufficient savings to cover their living expenses, inflationary costs, as well as medical or other emergencies,” wrote retired human resources manager Merle Minami-Shima, on behalf of AARP Hawaii. She continued, “Without adequate savings retirees will have no choice but to rely on others to help them with their financial needs and may even have to turn to the government to fill in the gaps.

Jeff Gilbreath Executive Director Hawaiʻi Community Lending (HCL), a nonprofit community development financial institution that makes grants and loans to help local people build, buy, and save homes from foreclosure, called saving for retirement “crucial to ensure security” against emergencies. He added that it would benefit the state as a whole as well, since it would “collectively slow outmigration of our local people.”

“There is an urgent need to provide a viable option for private sector workers to have access to a retirement savings plan,” wrote Taniguchi.

Finding out More

Previous coverage of SB 855 is available here and here.

Written testimony submitted for the April 1 hearing is available here.

A video of the April 1 hearing is available here.

Information about SB 855 is available here.