Hawaii Adds Another Small Business Owner Mandate
Op-ed Commentary from J.R. Robinson, Owner/Founder – Financial Planning Hawaii and Fee-Only Planning Hawaii
Hawaii has now joined the growing number of states attempting to close the retirement plan coverage gap through a state-facilitated IRA program.
The Hawaii Retirement Savings Program was created to provide private-sector employees without access to an employer-sponsored plan with a way to save through payroll deductions. Under Act 113, signed in 2025, covered employers must automatically enroll covered employees in the program unless the employee opts out.
The law broadly defines a covered employer as a business operating in Hawaii with one or more employees. An employer generally is excluded if it has offered or maintained a qualifying retirement plan for some or all employees at any time during the preceding two years.
The state program is intended to impose no employer contribution requirement. It may therefore be described as free to employers. But “no employer contribution” is not the same as “no employer cost.”
Employers will still have to register, supply employee information, coordinate with their payroll system, transmit deductions, process changes, respond to employee questions, and document compliance. A business using an outside payroll provider may face additional setup or service charges. A very small employer handling payroll internally will have to learn another system.
The state-sponsored account is an IRA, not an employer-sponsored qualified retirement plan. It does not provide the same contribution limits, plan design flexibility, employer matching opportunities, or potentially broader investment choices available through a 401(k). Yet the employer is still conscripted into administering the payroll connection.
The irony is difficult to miss. Hawaii wants more employers to facilitate retirement saving, but its mandate may cause some business owners to establish a minimalist state IRA arrangement instead of adopting a more generous employer-sponsored plan.
Worse, an employer with an existing plan may eventually conclude that maintaining it is no longer worth the complexity. Because Act 113 looks back at whether an employer offered or maintained a qualifying plan during the preceding two years, termination would not necessarily produce immediate eligibility for the state program. Still, the broader incentive problem remains. As federal and Hawaii compliance obligations accumulate, employers may become increasingly reluctant to sponsor plans voluntarily.
Related Reading:
Hawai’i Retirement Savings Program – Program Overview
Hawai’i Retirement Savings Program
Comptroller Sean Scanlon Welcomes The Hawai’i Retirement Savings Program To The Multistate Alliance For Retirement Security (June 5, 2026)
MyCTSavings – Heling employers grow and workers plan for the future