STAND. COM. REP. NO. 3641

Honolulu, Hawaii

RE: H.B. No. 1661

H.D. 1

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 1661, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO CAFETERIA PLANS,"

begs leave to report as follows:

The purpose and intent of this measure is to align the State's flexible spending account program with federal standards governing cafeteria plans.

More specifically, this measure requires the maximum contribution and carryover amounts for a public service flexible spending account plan to be set annually in accordance with the maximum amounts allowed under section 125 of the Internal Revenue Code.

Your Committee received written comments in support of this measure from the Hawaii Government Employees Association and United Public Workers.

Your Committee received written comments on this measure from the Department of Human Resources Development, City and County of Honolulu Department of Human Resources, and Tax Foundation of Hawaii.

Your Committee finds that public employees rely on flexible spending accounts to set aside pre‑tax income for eligible medical and dependent care expenses, reducing their taxable income and helping manage routine costs. Your Committee also finds that under current law, the State's maximum contribution and carryover limits are lower than the federal standards, which may restrict employees' ability to fully benefit from these programs and may create confusion when state and federal rules differ. Your Committee believes that aligning state provisions with federal standards will promote administrative consistency, ensure compliance, and provide equitable treatment of employees participating in the State's flexible spending account program.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1661, H.D. 1, S.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

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DONOVAN M. DELA CRUZ, Chair