Using the Hawaii 1.5% Rule

In Hawaii, an employer can elect to pay the entire premium amount or share the cost with the employee. The employer must pay for at least one-half of the (single) premium cost, however, the employee’s contribution cannot exceed 1.5% of the employee's monthly wages.

Requirements

Within a payroll batch, the system processes this calculation for employees who meet the following requirements:

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The employee’s resident state is Hawaii

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The employee has not waived their right to medical coverage. You can set medical waiver information for employees on the Employee Details form Other tab.

For more information, see the Human Resources User Guide.

For the purpose of this calculation, a “wage” is defined as any pay code with a pay classification of Earnings.

Note:  This assumption is based on the definition of wages found in the Hawaii Revised Statutes from the Hawaii Department of Labor, Chapter 388, which specifically states that wages do not include tips or gratuities of any kind.

Calculation

The calculation uses the following information in all reports that cover employee premium contributions:

Field	Description
Employee Contribution	The amount the employee is scheduled to contribute towards the cost of single coverage, based on the defined benefit rule.
Employee Premium Contribution	The pay period amount the employee is scheduled to contribute towards the cost of single coverage.
Employee MTD Contribution	The month-to-date amount contributed by the employee towards the cost of the benefit premium.

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The system processes the deductions for a regular batch, or special batch that is taking the place of a regular batch.

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The system takes the deduction only from regular and vacation vouchers.

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The system then checks to make sure that the currently scheduled employee contribution for an active medical plan does not exceed 1.5% of the employee’s current earnings. In doing this, it also calculates month-to-date earnings and employee contributions, and makes adjustments to the employee’s contribution either upward or downward throughout the month.

For example, if the employee’s wages are low in the first two pay periods of the month, the system reduces the employee’s scheduled contribution so that the contribution does not exceed 1.5% of earnings. If the employee is given a large bonus in the third pay period of the month, the system increases the scheduled contribution on the current voucher up to the amount that equals 1.5% of month-to-date wages to make up for the shortfall in the first two periods. This adjustment is done on a monthly basis. The system does not carry over any shortfall or overage into the next month.

Note:  To determine the scheduled month-to-date contributions at each pay period in the month, this calculation logic relies on the deduction periods. Be sure that the deduction periods defined in the payroll are defined correctly and in a linear fashion.

Deduction Periods for Vacation Pay Vouchers

It is critical that if vacation is paid in future pay periods, the deduction periods for those vacation pay vouchers must be defined correctly. You can set deduction periods in the Vacation Pay Override form. For more information, see the Payroll Overrides Guide.