Legislative Task Force urges action to address Hawaii retirement savings crisis

By Lia Kamanā

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    HONOLULU, Hawaii (KITV) — Nearly 215,000 Hawai’i workers do not have access to a retirement savings program through their employer, helping fuel a retirement savings crisis.

According to a legislative task force, Hawai’i is facing a projected tax and spending shortfall of more than a billion dollars over the next 20 years.

“We are facing a $7.7 billion fiscal cliff in the next 15 years as more people age out of the workforce without adequate savings and the number of working-age adults who can pay taxes to support government programs declines,” said Kathy Wyatt, chairwoman of the task force and adult day care center owner/operator.”

In an effort to address the issue, the task force for Hawai’i Retirement Savings, is recommending the creation of a state-facilitated retirement savings program.

A program that could become a reality, if the legislature passes Senate Bill 3289.

SB 3289 would create a board to establish and run a state-facilitated automatic IRA program and appropriate funds for marketing and to hire an administrator and support staff to start the program up over the next two years. The board would also be able to negotiate with private contractors. The program would be a public-private partnership, similar to the college 529 payroll savings program. The state would hire private companies to manage the automatic IRA program and invest the money. Funds would be held in individual worker accounts and would not be held nor invested by the state. Local businesses would be able to offer the payroll savings program to workers at little or no cost to the business.

To come up with the program, the task force met with and heard from local and national experts, small businesses and financial institutions.

“Doing nothing is not an option,” said Sen. Brian Taniguchi, chairman of the Senate Labor Committee and a member of the task force. “Every worker in Hawai`i deserves a chance for a secure retirement.”

An AARP small business survey found that nearly three quarters of Hawai‘i small business decision-makers and owners think more should be done to encourage workers to save for retirement, and four in five support the creation of a state-facilitated retirement savings program.

According to the survey:

2/5 small businesses do not offer employees a retirement savings program 72% of business owners say retirement savings plans are too costly 40% of business owners say they are concerned about how complicated they are to operate 32% of these small business owners say retirement savings plans would be too time-consuming to operate “For many small businesses like ours, a mom-pop take-out plate lunch shop, it’s hard for us to offer any retirement savings for our employees. The program proposed for Hawai`i makes sense for the employer and the employee,” said Eric Wong, co-owner of Loco Moco Ewa Beach and Wiki Wiki Drive Inn.

When asked how likely they would be to participate in a state-facilitated retirement savings program, 85% said they would be likely to offer it to employees if it was available to them.

“Small businesses recognize that there is a retirement savings crisis in Hawai‘i and want lawmakers to act to help their workers,” said Keali‘i Lopez, AARP Hawai‘i state director.

According to that same survey:

63% of small businesses are concerned about their employees not having enough money to cover health care or living expenses when they retire, 23% says they are very concerned. 75% of small business owners in this survey also said that as taxpayers, they are concerned that some Hawai`i residents have not saved enough money for retirement and could end up being reliant on public assistance programs.

“If we make it easy for working families to save, they will save money. Other states that offer automatic IRA programs are showing us the way,” said Keali`i Lopez, AARP Hawai`i State Director. “We know that too many working families in Hawai`i are struggling to stay out of poverty. What will happen to those families when they stop working? If we don’t help them now, they will retire broke and that will have far-reaching effects on state spending and taxes.”

The report notes that workers are 15 times more likely to save if they can do so through payroll deduction.

The task force found that a payroll savings program similar to what states like Oregon, California, Illinois, Connecticut, Maryland, New York, New Jersey, Colorado, Maine and Virginia have adopted.

According to AARP, as of mid-January, the programs have enrolled more than 420,000 workers who have saved more than $398 million. Many participants are first-time savers and the average income of savers in Oregon, which has had the program since 2017, is $29,000.

On Monday, March 8 the Senate approved SB3289. The bill now moves over to the House where the first committee has until March 16 to hear the bill.

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