Alaska2026Passed Legislature

HB389

HB 389: Rules for Holding Back Money in Construction Contracts

Last scannedSep 21, 2026, 12:32 AM

In one sentence

This bill sets rules for how much money can be held back from construction payments and requires faster payment of that money on both public and private projects.

Requires prime contractors to pay subcontractors within eight working days after receiving their own payment on public contracts.
Limits the amount of retainage, or withheld money, to no more than five percent of a progress payment for private construction contracts.
Mandates that all retained funds be placed in an interest-bearing escrow account so workers earn interest on the held money.
Requires written notices when withholding payments, stating exactly how much is kept and what work must be done to get paid.
Adds penalties of two percent plus interest for project owners or contractors who fail to pay retainage by the deadline.

Prime contractors working on public construction projects in Alaska
Subcontractors and suppliers providing services or materials for construction work
Project owners of private construction contracts
The state and local political subdivisions that fund public works

The bill only applies to contracts signed on or after the date this law officially takes effect.
The specific interest rate for penalties depends on a separate state statute that defines the 'prime rate'.
Contractors may choose to waive, or give up, their right to receive penalty payments if they are owed money.

Plain language

Retainage: Money withheld from a payment until the contract is finished or certain conditions are met.
Prime Contractor: The main company hired by an owner to build a project, who then hires other workers.
Escrow Account: A special bank account where money is held safely until it needs to be paid out.

Official record

Validated

RETAINAGE ON CONSTRUCTION CONTRACTS An Act relating to retainage on public and private construction contracts.

Official activity