It's not a penalty, it's an excise tax but people don't like to use that term.  To expand the question, does anyone know of any state that has an excise tax like the federal ones imposed on excess contributions or deficient distributions?  I think the states rely on the federal system to discourage such behavior.  And if any state did it, I would expect California or New York, not Hawaii.  For now, let's not talk about it, we don't want to give them any ideas.