RELATING TO HAWAII RETIREMENT SAVINGS ACT.

HB1136

HOUSE OF REPRESENTATIVES

H.B. NO.

1136

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO HAWAII RETIREMENT SAVINGS ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

����
SECTION 1.
�
The purposes of this Act are to:

����
(1)
�
Clarify
the definition of
"covered employer"
in the Hawaii Retirement
Savings Act
; and

����
(2)
�
Amend and align provisions of the
Hawaii retirement savings program, the state-facilitated payroll- deduction
retirement savings plan for private sector employees in Hawaii who do not have
access to employer-sponsored retirement plans, to require automatic enrollment
unless the employee opts out.

����
SECTION
2.
�
Section 389-2, Hawaii Revised
Statutes, is amended by amending the definition of
"
covered employer
"
to read as follows:

����
""Covered
employer" means any person who is in business in the State and has one or
more individuals in employment.

"Covered employer" does not include:

����
(1)
�
The United States;

����
(2)
�
The State or any of its political
subdivisions; or

����
(3)
�
A person that has [
been maintaining
]

offered or maintained
for
some or
all employees
at any time

during the preceding two years a retirement plan that is tax-qualified under or
is described in and satisfies the requirements of section 401(a), 401(k),
403(a), 403(b), 408(k), or 408(p) of the Internal Revenue Code."

����
SECTION
3.
�
Section 389-4, Hawaii Revised
Statutes, is amended by amending subsections (a) and (b) to read as follows:

����
"
(a)
�
The board shall
have powers and duties in accordance with law to
:

����
(1)
�
Establish, implement, and maintain the
program;

����
(2)
�
Cause the program and arrangements and
accounts established under the program to be designed, established, and
operated:

���������
(A)
�
In accordance with best practices for
retirement savings vehicles;

���������
(B)
�
To encourage participation, saving,
sound investment practices, and appropriate selection of default investments;

���������
(C)
�
To maximize simplicity and ease of
administration for employers;

���������
(D)
�
To minimize costs, including by
collective investment and other measures to achieve economies of scale and
other efficiencies in program design and administration;

���������
(E)
�
To promote portability of benefits; and

���������
(F)
�
To avoid preemption of the program by
federal law;

����
(3)
�
Arrange for collective, common, and
pooled investment of assets of the program;

����
(4)
�
Determine the eligibility of an
employer, employee, or other individual to participate in the program;

����
(5)
�
Ensure the program's compliance with
all applicable laws and regulations;

����
(6)
�
Establish procedures for the timely and
fair resolution of participant and other disputes related to accounts or
program operation;

����
(7)
�
Develop and Implement:

���������
(A)
�
An
investment policy that defines the program's investment objectives and that is
consistent with the objectives of the program; and

���������
(B)
�
Other
policies and procedures consistent with those investment objectives
;

����
(8)
�
Cause expenses incurred to initiate,
implement, maintain, and administer the program to be paid from the program and
other available sources;

����
(9)
�
Establish
and collect application, account, and administrative fees
;

���
(10)
�
Accept grants, gifts, donations,
legislative appropriations, loans, and other moneys from the State, any unit of
federal, state, or local government, or any other person to defray the costs of
administering and operating the program;

���
(11)
�
Enter into contracts pursuant to
chapter 103D for services that the board deems necessary to carry out the
purposes of this chapter, including:

���������
(A)
�
Services of private and public
financial institutions, depositories, consultants, actuaries, counsel,
auditors, investment advisors, investment administrators, investment management
firms, other investment firms, third-party administrators, other professionals
and service providers;

���������
(B)
�
Research, technical, financial,
administrative, and other services; and

���������
(C)
�
Services of other state agencies to
assist the board in the exercise of its powers and duties;

���
(12)
�
Develop and implement an outreach plan
to gain input and disseminate information regarding the program and retirement
savings in general;

���
(13)
�
Cause moneys to be held and invested
and reinvested under the program;

���
(14)
�
Ensure that all contributions to
individual retirement accounts under the program may be used only to:

���������
(A)
�
Pay benefits to participants under the
program;

���������
(B)
�
Pay the cost of administering the
program; and

���������
(C)
�
Make investments for the benefit of the
program; provided that no assets of the program shall be transferred to the
general fund of the State or to any other fund of the State or otherwise
encumbered or used for any purpose other than those specified in this
paragraph;

���
(15)
�
Provide for the payment of costs of
administration and operation of the program;

���
(16)
�
Evaluate the need for and, if the board
deems necessary, procure:

���������
(A)
�
Insurance against any and all loss in
connection with the property, assets, or activities of the program; and

���������
(B)
�
Pooled private insurance;

���
(17)
�
Indemnify, including procurement of
insurance if and as needed for this purpose, each board member from personal
loss or liability resulting from the member's action or inaction as a board
member;

���
(18)
�
Collaborate with and evaluate the role
of financial advisors or other financial professionals, including in assisting
and providing guidance for covered employees; [
and
]

���
(19)
�
Reimburse, when appropriate, the
general fund of the State of Hawaii for the initial expenses incurred for
initiating, implementing, maintaining, and administering the program; and

���
(20)
�
Take any other action the board deems
reasonably necessary to carry out the purpose of this chapter.

����
(b)
�
The board may develop and disseminate
information designed to educate covered employees about the impacts of [
opting
in to
] the program on take-home pay, savings strategies, and the benefits
of planning and saving for retirement to help covered employees in deciding
whether to participate and at what level participation may be appropriate."

����
SECTION
4.
�
Section 389-5, Hawaii Revised
Statutes, is amended by amending its title to read as follows:

����
"
[
[
]
�389-5
[
]
]
�
Hawaii retirement savings program; due
diligence; establishment; payroll deduction
[
upon election to
contribute
]
.
"

����
SECTION
5.
�
Section 389-5, Hawaii Revised
Statutes, is amended by amending subsections (d), (e), and (f) to read as
follows:

����
"(d)
�
[
Any covered employee may elect to
contribute a portion of the employee's salary or wages to an individual
retirement account provided by the program through payroll deduction.
]
Each
covered employer shall enroll its covered employees in the program and withhold
payroll deduction contributions from each covered employee's paycheck unless
the covered employee has elected not to contribute.

����
(e)
�

Beginning on a date to be determined by the board
pursuant to
subsection (a), a covered employer shall:

����
(1)
�
[
Allow
a
]
Automatically enroll
covered [
employee to enroll
]
employees

into the program after [
providing
]
the program administrator provides

the covered

[
employee
]
employees
with a written notice of
the [
employees'
] right to opt [
in;
]
out;
and

����
(2)
�
For
any covered employee who [
has opted in to
]
is enrolled into
the
program[
:
]
,
a covered employer shall:

���������
(A)
�
Withhold
the covered employee's contribution amount from the employee's salary or wages;
and

���������
(B)
�
Transmit
the covered employee's payroll deduction contribution to the program on the
earliest date the amount withheld can reasonably be segregated from the covered
employer's assets, but no later than the fifteenth day of the calendar month
following the month in which the covered employee's contribution amounts are
withheld.

����
(f)
�
The program shall establish for each enrolled
employee a Roth
[
IRA,
]
individual retirement account
,

into which the contributions deducted from [
an
]
the
employee's
payroll shall be deposited.
�
The board
may add an option for all participants to affirmatively elect to contribute to
a traditional [
IRA
]
individual retirement account
in addition to
or
in lieu of
a Roth [
IRA.
]
individual retirement account.
"

����
SECTION
6.
�
Section 389-14, Hawaii Revised
Statutes, is amended by amending subsection (a) to read as follows:

����
"(a)
�
Any covered employer who fails to enroll a
covered employee into the program in accordance with section 389-5(e)(1)
without equitable justification shall be liable:

����
(1)
�
To
the covered employee, in an amount equal to the contribution amount that would
have been made by the employee into the program and interest at a rate of six
per cent per year on the contribution amount, beginning from the date the
contribution would have been made into the account; provided that the sum of
the contribution amount and interest thereto shall be transmitted by the
covered employer to the program to be paid into the covered employee's IRA; and

����
(2)
�
A penalty of:

���������
(A)
�
$25
for each month the covered employee was not enrolled in the program; and

���������
(B)
�
$50 for each month the covered employee
continues to be unenrolled in the program after the date on which a penalty has
been assessed with respect to the covered employee who [
had elected to
participate
]
should have been enrolled
in the program."

����
SECTION
7.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

����
SECTION
8.
�
This Act shall take effect upon its
approval.

INTRODUCED BY:

_____________________________

BY REQUEST

Report Title:

Hawaii
Retirement Savings Act; Hawaii Retirement Savings Program; Covered Employer;
Definition; Automatic Enrollment; Opt-out Option

Description:

Clarifies
the definition of "covered employer" under the Hawaii Retirement
Savings Act.
�
Requires covered employers
to automatically enroll covered employees into the Hawaii Retirement Savings
Program unless the covered employee chooses to opt out.
�
Effective upon approval.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.