Policy Experts: Hawaii Doesn’t Need to Be in the Retirement Fund Business | Hawaii
(The Center Square) – Hawaii Governor David Ige is considering a bill that would establish a state-run retirement system, but the legislation has its critics.
Senate Bill 3289, passed by lawmakers earlier this month, would create the Hawaii Retirement Savings Board to oversee individual retirement accounts. Employees would decide if they wanted to participate. Employers would deduct their contributions and send them to the state.
The first 50,000 participants who contribute for 12 months would receive $500 from the state in matching funds, according to the legislation. Lawmakers included $813,600 in the fiscal year 2023 budget for implementing the IRA system.
The bill is supported by several groups, including AARP, United Way and the Hawaii Restaurant Association.
“For smaller restaurateurs, the high costs of establishing their own business programs that have prevented many in the past will be the hurdle that will be lifted,” said Victor Lim, chief legislative officer for the Hawaii Restaurant Association, in a statement. written testimony.
But it’s not the government’s role to provide residents with individual retirement accounts, and Hawaii has its own problems, said Joe Kent, executive vice president of the Grassroot Institute of Hawaii.
“Hawaii doesn’t have a good track record for keeping its state pension system solvent,” Kent said in an email to The Center Square. “The state can’t even fully fund its own public pension system, which is currently only 58% funded. Also, the state has no incentive to run an IRA properly, because that would be the private employees or taxpayers who would pay if the fund should tank.”
The bill is also opposed by the Tax Foundation of Hawaii.
“The private sector offers different types of retirement plans, including IRAs for those who cannot or do not want to participate in an employer-sponsored retirement plan,” the foundation said in written testimony to the Legislative Assembly. “The bill does not venture to explain how or why the government would be able to offer pension plans superior to those currently on the market.”
Proponents of the bill said the pension plans would ease the financial hardship of the state’s aging population. But others would also benefit from the bill, Kent said.
“The real winner of this proposal would be the lucky financial institution chosen by the state to manage the fund, as it would be blessed with a steady stream of paying customers,” Kent said. “It could distort the market and eradicate competition.”
Ige has until June 27 to decide whether he will veto a bill.