New Illinois Retirement Plan: What Employers Must Know
Illinois recently introduced a new state-sponsored retirement savings plan called Illinois Secure Choice. The program offers private-sector employees a retirement savings option if they don’t have access to an employer-sponsored plan. The first several months of the program are considered the pilot phase, and registration is voluntary. But by November of 2019, most Illinois employers without an existing retirement savings plan will be legally required to offer Secure Choice.
What does this mean for business owners?
Following the pilot period, there will be a phased rollout and employers will be notified of their legal requirement to participate in the program. The largest employers without 401(k) plans will be notified first, followed by midsize and small employers. At the time of notification, the State will contact employers directly and confirm if they’re required to register, or certify that they’re exempt. Here’s the timeline for notifications:
- November 2018: Employers with 500+ employees
- July 2019: Employers with 100 – 499 employees
- November 2019: Employers with 25 – 99 employees
Based on the new requirements, employers with 25 or more workers, who’ve been operating in Illinois for at least two years without a retirement savings plan (e.g., 401k, Simple IRA or SEP-IRA plan) will be required to automatically enroll their employees in Secure Choice. In addition to enrollment, employers will be responsible for distributing state-provided informational materials, setting up the payroll deduction process and ensuring timely remittance of employee retirement contributions.
What’s this going to cost?
Aside from the time required for setup, enrollment, and remittance of contributions, Illinois Secure Choice does not have any associated program fees or administrative costs. If employers don’t comply with the program, however, they may be subject to penalties. For a nominal fee, Payroll Data can help clients with Secure Choice setup.
Employers are not allowed to contribute to accounts, and they have no administrative, managerial or fiduciary obligations like they normally would with an employer-provided plan.
Is this a sign of what’s to come for other states?
It’s likely that other states could follow suit by adding state-sponsored retirement plans. Across the country, there’s a retirement savings gap and states are looking for ways to ensure it’s easy for employees to enroll in a retirement plan. Research over the years has shown better retirement outcomes for employees that have access to retirement plans through work, and employees are 15 times more likely to save for retirement if they have a workplace option, according to an AARP study. While Illinois Secure Choice is the first program of its kind, the majority of states are in various planning stages of similar initiatives.
Have more questions? We’re here to help.
For more information and resources on Illinois Secure Choice, visit their website. If you have questions on how this may impact your business, please contact your Payroll Data Client Service Representative or send us a note. We’ll continue monitoring for similar retirement initiatives that might be underway in other states, and will keep you up-to-date.