If your business has employees in Hawaii, check whether a new state retirement requirement applies to you. The Hawaii Retirement Savings Program is projected to launch in late December 2026, and many small businesses without a retirement plan will need to either participate or offer a qualifying plan of their own.
That date is a projection and could change, and the state has not yet published registration or enrollment deadlines. But this will touch your payroll, so now is a good time to review whether you are covered and which option makes the most sense.
What is the program?
The Hawaii Retirement Savings Program is a state-run retirement savings program for private-sector workers who do not have a plan through their employer. Covered employees are automatically enrolled in a Roth IRA and save through payroll deductions, unless they opt out.
The default contribution is 5% of wages, made with after-tax dollars. Employees can opt out or change their contribution amount. Roth IRA income eligibility rules and annual IRA contribution limits still apply, and the account belongs to the employee.
Is your business covered?
Hawaii businesses with one or more employees must participate in the program unless they qualify for an exemption, such as having offered or maintained a qualifying retirement plan within the preceding two years. Even businesses with only one employee should review their obligations.
Which employees are included?
A covered employee is generally a Hawaii resident, age 18 or older, who works for a covered employer and is paid wages subject to Hawaii income tax. Excluded employees include those covered by the federal Railway Labor Act and those on whose behalf the employer contributes to a Taft-Hartley multiemployer pension trust fund.
Two groups deserve a closer look:
- Mainland or remote staff. Residency is part of the test, so look at each person’s residency and the other conditions rather than where the work happens. A multi-state team may have some employees who are covered and others who are not.
- Independent contractors. The definition refers to individuals employed by a covered employer, so how you classify your workers can matter.
What will employers have to do?
Employers are responsible for facilitating enrollment and payroll deductions, but employees control whether they participate and how much they contribute, subject to applicable limits.
Employers do not contribute to employee accounts. In fact, the state says employer contributions are not permitted under this program. The state also says participating does not create a fiduciary responsibility for your company, although the responsibilities above still apply.
Before you decide to use the state program, compare your retirement plan options.
What happens if you do not comply?
Employers that fail to meet applicable registration, enrollment, or contribution requirements may face financial penalties and potential employee claims. Penalties can be significant, so employers should monitor the state’s implementation deadlines and establish procedures to ensure employee contributions are properly withheld and remitted.
State program or your own plan?
The state program is not your only option. You can instead offer a qualifying employer retirement plan, including by participating in a qualifying 401(k) Pooled Employer Plan.
The state program may be a good fit if you want a relatively straightforward way to comply and do not plan to contribute for your team. An employer-sponsored plan may offer higher contribution limits, employer contributions, and tax advantages, depending on the plan. A 401(k) can allow employee deferrals and employer matching, while a SEP generally uses employer contributions without employee salary deferrals. Setup, ongoing costs, and contribution obligations vary, so compare your plan options before you decide.
How to prepare now
- Check your status. Confirm whether you have offered a qualifying plan in the past two years.
- Review your team. List which employees are Hawaii residents and confirm that your workers are classified correctly.
- Compare your options. Decide whether the state program or your own plan makes more sense before registration opens.
- Connect with us. We can discuss how enrollment, opt-outs, and contribution transmittals will be handled.
- Watch for official updates. The state will announce deadlines, and the Hawaii Retirement Savings Program website is the place to check.
Action Item
The Hawaii Retirement Savings Program is approaching, and employers should begin reviewing their options now rather than waiting for enrollment deadlines to be announced.
Whether you plan to participate in the state program or establish a retirement plan for your business, Payroll Vault and Key2 Accounting can help you understand your options and prepare your payroll processes.
Contact us today to discuss your next steps.
Payroll Vault
Phone: 808-200-1141