This year, the Hawaii Legislature is considering two bills — Senate Bill 1374, sponsored by Sen. Brian Taniguchi, and House Bill 1189, sponsored by Rep. Aaron Johanson — that would take the first steps to create a Hawaii Saves payroll retirement saving program for 216,000 workers in the private sector who are not currently able to save for retirement at work.
About half of all employees in Hawaii’s private sector, mostly in small and medium-sized companies, are heading for an uncertain future because they do not have an easy way to save at work. Without retirement savings to supplement Social Security, these hard-working residents are in real danger of spending their final years in financial dependence on family and government, if not poverty and homelessness.
The Employee Benefit Research Institute found that workers are 15 times more likely to save if the money is taken from their paychecks, before they get a chance to spend it. They are 20 times more likely to save if they are auto-enrolled in a program with the option to opt out. The easier it is to save, the more people do it.
Several states have created or are creating state-facilitated retirement savings programs, including Oregon, California, Illinois and Connecticut. In Oregon, the first state to have a working statewide retirement savings program for private-sector workers, about 72 percent of eligible employees in 2,899 companies have saved $12.5 million between July 2017 and Feb. 1, 2019. The average savings rate is 5.6 percent of their paycheck or about $100 a month. These workers are taking full advantage of this opportunity.
Small businesses want it, too. In a recent AARP survey, 7 out of 10 Hawaii small business owners support a simple retirement payroll savings option. About two-thirds of small businesses currently do not offer a retirement savings program or pension plan. Small businesses say it’s too expensive, complicated and time-consuming to do so.
The Hawaii Saves program could save taxpayers an estimated $160 million in federal and state public assistance programs, with the state’s share of the saving estimated at $32.7 million between 2018 and 2032 if workers save enough to generate an additional $1,000 a year in extra retirement income.
The Hawaii Saves program would simply afford workers an easy way to save their own money for retirement through automatic payroll deductions. The program will be setup by the state, as in Oregon, and will be managed by qualified private financial services companies in a public-private partnership, similar to college 529 savings plans.
But now, as the Legislature seeks to find a responsible solution, lobbyists for big insurance companies, financial institutions and financial planners oppose this legislation and now insist that workers without plans should use their products. These opponents have been unable, unwilling or disinterested in creating and marketing savings programs that small businesses can afford and easily implement.
Unfortunately, the fact that fully half of Hawaii’s private sector workers have no retirement savings offered through their employers prove existing retirement savings products are not working.
We cannot accept the status quo any longer. There is a cost to workers, society, families and taxpayers of ignoring this impending crisis when thousands are in danger of retiring broke or are forced to work because they cannot afford to retire.
To the private financial sector, which failed this huge segment of working people, it’s time not to oppose any remedy, but to offer its expertise to get a Hawaii Saves program started and operating — or get out of the way.
Francis Nakamoto is a retired attorney, former congressional staffer and AARP volunteer.
