AARP Eye Center
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AARP Hawai`i and other supporters of a Hawai`i retirement savings program gathered in Gov. David Ige’s ceremonial office earlier this month to celebrate the governor’s signing of Senate Bill 3289 into law.
Act 296 will create a Hawai`i retirement savings program that will eventually give all Hawai`i workers access to an easy way to save for retirement, through payroll deduction at work. That’s important because payroll deduction is the most effective way to save. Workers are 15 times more likely to save if money comes out of their paychecks before they have a chance to spend it.
“The new law (Act 296) is a win for workers, taxpayers and small businesses,” said Keali`i Lopez, AARP Hawai`i state director. “All workers deserve a chance at a secure retirement. Small businesses will be able to offer a benefit that can help them retain good workers and taxpayers also benefit in the long run because as more workers save, fewer kupuna will retire into poverty and that should reduce the need for state spending on social service programs.”
A study released earlier this year estimated that the state will spend $1.72 billion on social services for kupuna without adequate retirement savings over 20-years if nothing is done to increase savings rates.
About half of Hawai`i’s private sector workers do not have payroll savings. Most of the estimated 215,000 workers in Hawai`i without retirement savings programs work for small businesses. An AARP Survey of small businesses found that businesses that don’t offer retirement savings said programs are too costly and complicated to operate.
About 80 percent of small businesses surveyed said they support the creation of the program and 85 percent said they would be likely to offer it to employees when it becomes available.
The new law authorizes the creation of a Hawai`i retirement savings program and creates a board attached administratively to the Department of Labor to oversee the program. The new program will be a public-private partnership similar to the college 529 savings programs. The state will help create the program and oversee it but the actual administration of the program will be conducted by private companies and held and invested in individual accounts. The state will not hold the worker’s money.
The Legislature also create a $25 million fund that will contribute $500 for each worker who signs up for the program during its first year of operation.
It will likely take a year to two years before the program begins operation. Hawai`i joins about a dozen other states in offering a state-facilitated retirement savings program to businesses and workers. In Oregon, California and Illinois where the first programs were established, workers have saved more than 457 million dollars, according to Massena and Associates, a consultant who tracks retirement savings programs.
“We thank the governor for signing the Hawai`i Retirement Savings Act into law and the Legislature for passing the bill.,” Lopez said. “We look forward to working with the next governor to implement the law and make a Hawai`i retirement savings program a reality.”