Task Force Urges Action to Address Retirement Savings Crisis

Noting that Hawai`i is facing a retirement savings crisis, a Legislative task force is recommending the creation of a state-facilitated retirement savings program that will give more than 200,000 Hawai`i workers access to retirement savings at work and address a projected tax and spending shortfall of more than a billion dollars over the next 20 years. 

“We are facing a $7.7 billion fiscal cliff in the next 15 years as more people age out of the workforce without adequate savings and the number of working-age adults who can pay taxes to support government programs declines,” said Kathy Wyatt, chairwoman of the task force and adult day care center owner/operator. “We call on lawmakers to plan for the future. Actions taken now to increase retirement savings will have a huge impact in reducing taxes and protecting the ability of government to provide essential services in the next 10 to 20 years.”

The Hawai`i Retirement Savings Task Force met over the summer and heard from local and national experts, small businesses and financial institutions to come up with its recommendation to create an automatic IRA retirement program that small businesses without current retirement programs can offer to workers at little to no cost. A Pew Charitable Trusts analysis created for the task force found that the program could become self-sustaining in five years.

“Doing nothing is not an option,” said Sen. Brian Taniguchi, chairman of the Senate Labor Committee and a member of the task force. “Every worker in Hawai`i deserves a chance for a secure retirement. The task force found that a payroll savings program similar to what states like Oregon, California, Illinois, Connecticut, Maryland, New York, New Jersey, Colorado, Maine and Virginia have adopted will help Hawai`i workers save their own money, help small businesses offer programs to their workers and help Hawai`i taxpayers by reducing the need for expanded social services programs.”

Taniguchi sponsored Senate Resolution 76, which created the task force and introduced Senate Bill 3289 this session, which would implement its recommendations. The bill passed the Senate unanimously and crossed over to the House.

Meanwhile, a similar House bill did not get a hearing and died.

AARP Hawai`i is urging House leaders to hold hearings and pass SB 3289. If you agree that the Legislature should create a Hawai`i retirement savings program to give more workers an easy way to save go to action.aarp.org/hisaves and send an email to your representative asking him or her to pass SB 3289.

SB 3289 would create a board to establish and run a state-facilitated automatic IRA program and appropriate funds for marketing and to hire an administrator and support staff to start the program up over the next two years. The board would also be able to negotiate with private contractors. The program would be a public-private partnership, similar to the college 529 payroll savings program. The state would hire private companies to manage the automatic IRA program and invest the money. Funds would be held in individual worker accounts and would not be held nor invested by the state. Local businesses would be able to offer the payroll savings program to workers at little or no cost to the business.

“If we make it easy for working families to save, they will save money. Other states that offer automatic IRA programs are showing us the way,” said Keali`i Lopez, AARP Hawai`i State Director. “We know that too many working families in Hawai`i are struggling to stay out of poverty. What will happen to those families when they stop working? If we don’t help them now, they will retire broke and that will have far-reaching effects on state spending and taxes.”

The task force report cited a 2020 Department of Business, Economic Development and Tourism Report that looked at Hawai`i’s Generational Economy, the population shift of a growing number of older households and a reduced number of working-age households and the impact to the state’s economy of a smaller working-age tax base supporting older non-working households. The report, by East West Center and University of Hawai`i researcher Andrew Mason, found that changing demographics, fewer working-age households and increased costs for older households will “produce a $7.7 billion hole in our economy by the year 2035.” The task force report also estimates that the state will see more than $1 billion in increased social spending needs because of a lack of retirement savings.

The task force report notes that recent studies show that small amounts of additional savings – as little as $25 a week or about $100 a month – can make a significant difference in the retirement readiness of low-and moderate-income workers. The report notes that workers are 15 times more likely to save if they can do so through payroll deduction. But about two in three Hawai`i employers do not offer workplace retirement savings programs. A survey conducted by the task force found four in five small businesses would offer retirement savings to their workers if a state-facilitated retirement savings program was available and think the Legislature should support the creation of a state retirement savings program.

“Payroll savings is the most effective way to get people to save. Relatively few people save outside of work,” said Lisa Massena, a consultant to the task force and the former executive director of the OregonSaves program. “Many of the people saving in programs like OregonSaves, CalSavers, and Illinois Secure Choice are first-time savers. The average income of typical participants in Oregon is just $29,000 a year. The key is to make saving easy and to take the money out of a saver’s paycheck before they get a chance to spend it.”

In addition to Wyatt, Taniguchi and Lopez, other task force members were Rep. Richard Onisihi, chairman of the House Labor Committee; Tina Yamaki, vice chairwoman and president of the Retail Merchants of Hawai`i; John D’Amato, attorney with D’Amato and Maloney; Jeff Gilbreath, executive director of Hawai`i Community Assets; Craig Hirai, director of the state Department of Budget and Finance; Bill Kunstman, assistant to the director of the state Department of Labor and Industrial Relations; Craig Suemori, founder and president of the SI Group; and Peter Tsukazaki, managing partner of Tao Investments Hawai`i.