Hawaii's Small Businesses, Workers Need Simple Way to Save For Retirement

At Tanioka’s Seafood and Catering in Waipahu, the line sometimes stretches out the door for their famous ahi limu poke, maki sushi and sashimi platters.

The family owned business takes pride in its local roots, community service, quality food and the service-with-a-smile attitude of its 150 workers.

Founder Mel Tanioka and daughter Jasmine Tanioka, the company’s chief financial officer, want to offer a 401(k), IRA or other retirement savings plan to their workers, but found the administrative costs too high and the financial responsibility too great for a business of their size to sustain a savings plan to help workers save for retirement through payroll deduction.

“We have wonderful employees and want to help them succeed. We do have a profit sharing plan and adding a savings plan that’s less complicated, with low or no administration cost and no fiduciary responsibility would be a blessing,” Mel Tanioka said.

Tanioka’s is not the only local business constrained by the financial and legal barriers to helping their employees through payroll savings plans.

AARP estimates that 216,000 workers in Hawaii — about half the private sector workers between the ages of 18 and 64 — work for a company that does not offer a retirement savings plan. Most of these workers are in small- or medium-size businesses.

A survey of registered voters in Hawaii who are still working found that 60 percent are anxious about having saved enough money for retirement and 86 percent wished they had more money saved. That’s not surprising considering that the average household in the U.S. has only $2,500 saved and near-retirement households have only $14,500 in savings.

A bill in the state Senate would help Hawaii’s small businesses help workers save for retirement. Senate Bill 2333 would take the first steps toward creating a state retirement plan for private companies.

The state wouldn’t run the plan — that would be contracted out to a private financial company. But a state plan would allow businesses to offer retirement savings to workers at no cost to the business and without the fiduciary duty — the legal responsibility that keeps many businesses from offering savings plans to their employees.

The program would be similar to the public-private partnerships that allow families to save for their children’s education through 529 college savings plans.

Last year Oregon became the first state to offer a retirement plan to private businesses and their workers. In just the first six months, 3,350 workers saved more than $600,000 through the OregonSaves pilot program. About 70 percent of workers offered the plan are now saving money in their own personal Roth IRA accounts.

The accounts will follow them if they change jobs and the money that workers put in can be withdrawn at any time, if needed. Hawaii could also choose to offer regular IRAs, which would allow pre-tax savings.

The fees are kept low so that workers can save more money. The fees reimburse the state for the costs of starting and overseeing the program and when the start-up costs are paid off, the fees will drop.

Studies have shown that the key to saving is payroll deduction — setting aside the money before you have a chance to spend it. Workers are 15 times more likely to save if it comes out of their paychecks.

Social Security, alone, is insufficient to cover your retirement needs. The mean benefit check in Hawaii is just $1,305 a month.

Without savings to cover the gap, people will need to keep working and if health or other problems cause them to stop, they will likely need Medicaid, housing assistance, SNAP and other safety net programs.

A University of Maine study estimates that if lower-income retirees saved enough to increase their retirement income by $1,000 a year, the state would save $32.7 million on public assistance programs and Hawaii taxpayers would see a $160 million reduction in state and federal spending over 15 years. The savings would grow as people are able to save more money.

This story originally appeared in Honolulu Civil Beat.