Bill Text: HI SCR211 | 2021 | Regular Session | Amended
Bill Title: Urging The Department Of Human Resources Development And Department Of Education To Establish And Offer A Qualified Roth Contribution Program To Their Retirement Plan Participants.
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Engrossed - Dead) 2021-04-08 - Report adopted. referred to the committee(s) on FIN as amended in HD 1 with none voting aye with reservations; none voting no (0) and Representative(s) McDermott excused (1). [SCR211 Detail]
Download: Hawaii-2021-SCR211-Amended.html
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THE SENATE |
S.C.R. NO. |
211 |
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THIRTY-FIRST LEGISLATURE, 2021 |
S.D. 2 |
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STATE OF HAWAII |
H.D. 1 |
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SENATE CONCURRENT
RESOLUTION
URGING THE DEPARTMENT OF HUMAN RESOURCES DEVELOPMENT AND DEPARTMENT OF EDUCATION TO ESTABLISH AND OFFER A QUALIFIED ROTH CONTRIBUTION PROGRAM TO THEIR RETIREMENT PLAN PARTICIPANTS.
WHEREAS, even if an individual qualifies to receive Social Security retirement benefits, the Social Security Administration states that the benefits only compensate about forty-two percent of an average worker's income after retirement; and
WHEREAS, the State has a vested interest in ensuring that its populace has adequate retirement savings for economic and healthcare purposes, as people without sufficient retirement savings may need to rely on governmental assistance after retirement, which in turn will impact the state budget; and
WHEREAS, the average life expectancy in Hawaii, which increased from 76.8 years in 1980 to 81.3 years in 2018, is the highest among all states in the United States; and
WHEREAS, the significant increase in the life expectancy of its populace makes retirement planning even more critical in Hawaii; and
WHEREAS, some employers in Hawaii, including the state government, provide their employees with retirement savings plans as part of their benefits package and use them as recruitment incentives; and
WHEREAS, the State offers its employees:
(1) A tax-qualified defined benefit pension plan that requires mandatory employer contributions by the State, is governed by section 401(a) of the Internal Revenue Code, and is administered by the Employees' Retirement System;
(2) The Island $avings Plan, which is a voluntary deferred compensation plan offered by the Department of Human Resources Development that is governed by section 457(b) of the Internal Revenue Code and administered by Prudential Retirement Insurance and Annuity Company;
(3) A voluntary tax-sheltered annuity plan for employees of the Department of Education and University of Hawaii that is governed by section 403(b) of the Internal Revenue Code and administered by National Benefit Services, LLC; and
(4) A deferred compensation retirement plan offered by the Department of Human Resources Development for part-time, temporary, and seasonal/casual employees that is governed by section 457 of the Internal Revenue Code and administered by Life Insurance Company of the Southwest, a member of National Life Group; and
WHEREAS, all retirement plans currently offered to state employees are traditional retirement plans that deduct contributions from the employee's pre-tax income, and therefore reduce the employee's taxable income and federal and state tax burden for that current year; however, all future distributions, including capital gains in the account, are treated as taxable income at the time of withdrawal; and
WHEREAS, section 402A of the Internal Revenue Code allows employer retirement plans governed under sections 401(k), 403(b), and 457(b) of the Internal Revenue Code to have a qualified Roth contribution program, under which plan participants may designate some or all of their retirement contributions as designated Roth contributions and have them placed into their designated Roth accounts; and
WHEREAS, unlike traditional pre-tax retirement contributions, an employee's designated Roth contribution is included in the employee's gross income in the year the contribution is made; however, qualified distributions from the designated Roth account, including capital gains in the account, are not treated as taxable income at the time of withdrawal; and
WHEREAS, the option of a designated Roth account will benefit many plan participants, especially those employees whose retirement distributions will not occur until decades later, because the tax savings for the distributions and capital gains accumulated in their designated Roth accounts over the years may surpass the amount of tax saved by making pre-tax contributions into traditional accounts; and
WHEREAS, the states of Alaska, Connecticut, Idaho, Iowa, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New York, and Ohio, and municipalities including Philadelphia, Phoenix, Mesa, and Salem offer a qualified Roth contribution program to their employees; and
WHEREAS, under section 401(a) of the Internal Revenue Code, the Employees' Retirement System cannot maintain its tax-qualified status if it offers "elective deferrals" of compensation to its participants in the manner contemplated by a Roth contribution plan; and
WHEREAS, in contrast, the Department of Human Resources Development and Department of Education currently offer a deferred compensation program for state employees separate from the retirement plans offered by the Employees' Retirement System, and can offer an alternative, qualified Roth contribution program for elective deferral of compensation by state workers; and
WHEREAS, a broader selection of retirement plans will entice more employees to contribute to their retirement accounts and induce other public and private sector employers to offer their employees the same option; now, therefore,
BE IT RESOLVED by the Senate of the Thirty-first Legislature of the State of Hawaii, Regular Session of 2021, the House of Representatives concurring, that the Department of Human Resources Development and Department of Education are urged to establish and offer to their retirement plan participants, a qualified Roth contribution program by January 1, 2024; and
BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Governor, Director of Human Resources Development, Chairperson of the Board of Education, and Superintendent of Education.
Retirement Plans; Qualified Roth Contribution Program; Designated Roth Accounts; Department of Human Resources Development; Department of Education
