As an archipelago in the heart of the Pacific Ocean, Hawaii boasts plenty of natural beauty—and flourishing businesses. While there are many benefits to living in the state, it is also one of the least affordable states to retire in. That means it’s paramount that Hawaii workers have accessible ways to save for their future through employment.

Hawaii passed legislation to establish a state-facilitated retirement savings program. The Hawaii Retirement Savings Program was created to provide an accessible retirement plan for employees in the state and encourage them to save for their golden years.

In this article, we’ll answer some questions you may have about the Hawaii Retirement Savings Program and explain how it affects Hawaii businesses.

How Does the Hawaii Retirement Savings Program Work?

The Hawaii Retirement Savings Program will provide coverage for private-sector workers who previously did not have access to an employer-sponsored retirement savings plan.

Unlike many other state programs, the Hawaii Retirement Savings Program will not require employers to automatically enroll their employees. This unique feature means that workers in Hawaii will need to opt in to the program in order to participate. Employees who opt in will contribute to the program through automatic deductions from their paychecks into a Roth individual savings account (Roth IRA). The default contribution amount is 5% of the employee’s compensation, but each individual can elect a higher or lower percentage.

The Hawaii Retirement Savings Program is overseen by the Hawaii Retirement Savings Board, in consultation with the Department of Labor and Industrial Relations and the Department of Budget and Finance.

Which Businesses are Affected?

Businesses who have one or more individuals in employment are required to notify their employees about the program and, if employees choose to opt in to the program, must then facilitate contributions. In 2024, pending program amendment legislation seeks to change the program to the traditional auto-IRA model requiring employer participation and employee opt-out.

Registration Deadline

The Hawaii Retirement Savings Program has not yet launched, so a registration deadline has yet to be determined.

Penalties

After its launch, businesses that fail to comply with the program may face penalties of up to $5,000 per year.

Who is Eligible to Save With the Hawaii Retirement Savings Program?

Most individuals who are 18 years or older and satisfy any other criteria established by the program’s board are eligible to participate in the Hawaii Retirement Savings Program.

The program is voluntary for employees, and they can change their contribution amount or opt out at any time.

Conclusion

The Hawaii Retirement Savings Program represents a notable development in retirement planning for Hawaii workers. Contributions made directly through payroll deductions simplify the process of setting aside funds for retirement.

Once it launches, the program will require businesses to notify their employees about the program and, if employees choose to opt in to the program, employers must then facilitate contributions, so it’s important for Hawaii employers to familiarize themselves with the program details and requirements.