Retirement plan coverage for certain private-sector employees would expand under measures legislators in Rhode Island and Hawaii are considering.
Securing Coverage in the Ocean State
Increasing private-sector retirement plan coverage in a shifting retirement landscape is a major factor behind legislation that would establish Rhode Island Secure Choice, says Rhode Island General Treasurer James Diossa. The measure would provide retirement plan coverage for private-sector employees in the Ocean State whose employers do not.
Diossa made his remarks at a March 28 hearing of the Rhode Island House Finance Committee. He joined House State Government and Election Committee Chairman Rep. Evan P. Shanley (D-East Greenwich) in offering testimony about House Bill 7127, the measure that would create Rhode Island Secure Choice. Shanley introduced the bill in the House in January; Sen. Meghan Kallman (D-Pawtucket) introduced the Senate version, SB 2045, two days later.
“This bill creates an automatic IRA savings program for private-sector workers employed by companies with five or more individuals,” said Diossa, telling the committee, “by passing this bill, we will create a voluntary savings program to provide working families with the choice to build a more secure financial future.” Shanley added that it is “key” that the program would be voluntary for employees.
Cost. Shanley reported that it is estimated that the program would cost the state of Rhode Island $155,393 over two years, largely due to the expense of hiring a staff person to handle it. He called it a “precautionary estimate,” however, telling the committee that the state Treasury Department thinks that the program can be run through funding from the existing budget and existing staff. “We feel confident it won’t be anything,” he said of the potential to add new expenditures of state funds.
As for employers, Diossa said that “Ideally, what’s going to happen is that we’ll hire a third party company that’s gonna create the customer service aspect of the program. All we’re asking for is for the employer to give us access to the employees. The third party is the one that involves them.”
When asked by a committee member whether the companies hired to manage the program would hurt financial advisors, Diossa responded that he has not heard of such an effect in the other states that have put such programs in place.
Diossa also outlined the costs of not enacting such a measure and not putting such a program in place, observing, “States in the aggregate face an estimated $334 billion in increased state spending because of insufficient savings. This places added stress on state and federal safety nets like Social Security.”
Meeting a Need. “What this will do is give hundreds of thousands of Rhode Islanders who currently have no access to a plan to save for retirement access to save for retirement in a single and transferrable way,” Shanley told the committee, adding that the measure “will help people save for retirement who otherwise can’t afford to.”
Diossa indicated that the need for such a measure in Rhode Island is acute. “Far too many Rhode Islanders work each day without the promise of a solid financial future,” he said, adding, “Workers in Rhode Island have among the lowest rates of access to employer-provided retirement plans,” and telling committee members that 40% of private-sector workers in Rhode Island are employed by businesses that do not offer a plan.
“As a state, we must do much more to ensure that Rhode Islanders are saving during their work life so that they are financially prepared to retire,” Diossa continued.
“Secure Choice provides private-sector workers the means to save for retirement through a state-administered retirement savings program that can be implemented with minimum start-up costs and at no expense to employers,” Diossa asserted.
The Bigger Picture. There are bigger factors involved than just the circumstances in Rhode Island, Diossa suggested.
“We are on the precipice of a retirement crisis that is in desperate need of a solution,” said Diossa, continuing, “A generation ago, many private businesses provided a retirement plan and middle-class families were able to save during their working years. Today, many employers, particularly small businesses, find themselves unable to provide retirement benefits because of high start-up costs and limited administrative capacity.”
“The program will be a success in Rhode Island,” predicted Diossa, just as comparable plans in other states have been.
Hawaii Retirement Savings Program Closer to Auto Enrollment
Legislation that would put in place automatic enrollment of eligible private-sector employees in the Hawaii Retirement Savings Program is one step closer to passage.
On April 9, the state House of Representatives passed SB 2553, a measure that would change that. Under her bill, employees would no longer be required to opt in to participate in the Hawaii Retirement Savings Program but rather would be automatically enrolled. The Senate had done so on March 5.
Background. When the Hawaii Retirement Savings Program was established in 2022, one of the two features that made it stand out from its counterparts in other states that had already adopted such programs was that employees would be required to opt in if they wanted to participate instead of being automatically registered.
The Legislation. On Jan. 19, 2024, Sen. Sharon Moriwaki (D-Waikiki) introduced SB2553. On Feb. 2, the Hawaii Senate Labor and Technology recommended that it be passed with amendments and referred the bill to the Senate Ways and Means Committee, which on March 1 gave it their nod. The full Senate passed it on March 5 and referred it to the House of Representatives, which sent it to the House Labor and Government Operations Committee. On March 14 that committee recommended that the bill be passed with amendments and referred it to the House Finance Committee.
The Hawaii House Finance Committee on April 2 held a hearing on the measure. In written testimony about the bill, William Kunstman, Co-Chair of the Hawaii Retirement Savings Board—the body that administers the program—endorsed the bill and automatic enrollment of eligible employees. “The Hawaii Retirement Savings Board strongly supports this proposal to require employers to automatically enroll employees in the Hawaii Retirement Savings Program and allow employees to opt-out instead of opt-in to the program,” wrote Kuntsman. He continued,
“There is an urgent need to provide a viable option for private sector employers and workers to have access to a state-facilitated retirement savings plan. An employer survey conducted by the Hawaii Retirement Savings Task Force identified that the majority of small business owners agree that being able to offer a voluntary, portable retirement savings program would help local small businesses attract and retain quality employees and stay competitive. Opt-out retirement plans also increase participation rates as too few workers would otherwise put away savings for retirement. “
And he warned of the consequences of not putting automatic enrollment in place. “The Board believes that without this change the program may not be viable, especially as aligning Hawaii’s law with most of the other states’ automatic enrollment provisions facilitates the potential for Hawaii to engage in an interstate compact agreement,” wrote Kuntsman. He added that the lack of “opt-out” was impeding the Board from recruiting an executive director and also from conducting a feasibility study because it believes it would not be able to find a vendor willing to conduct the study based on the existing “opt-in” program design.
The House Finance Committee recommended that the measure be passed, with amendments.
Where it Stands Now. Since the House amended the version of SB2553 the Senate passed, the bill has been returned to the Senate so it can consider the amended version.
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