Last fall, I wrote about the Illinois mandatory retirement program, which was set to take effect on November 1, 2018. Only large employers, those with more than 500 employees, were required to participate in it, and there was a real question as to whether it would remain in place, as then-Governor Rauner issued an amendatory veto that would have made the program optional, not mandatory.
That uncertainty has since been resolved, as the Illinois legislature last month chose not to act on the amendment, essentially overriding the amendatory veto. Governor Pritzker has shown no signs of wanting to repeal the law, so I expect it to be here to stay. And later this year it will start applying to smaller employers, so if you are one of these smaller employers, you should start preparing to comply with the program now.
The program is officially known as the Illinois Secure Choice Savings Program Act, and it requires private sector employers who have more than 25 employees and who have been operating in Illinois for at least two years to participate in the program or have another qualified retirement plan. Other qualified retirement plans include 401(k) plans, Simple IRAs, and SEP-IRA plans, among others.
Employers who are required to participate in the Secure Choice program must withhold 5% of an employee’s compensation from his or her paycheck unless the employee opts out of the program or requests a different amount to be withheld. Employers then remit the amount withheld to the state-run program. Employers are not permitted to make any contributions. The program is administered by a seven-person board, which contracts out the administration of the fund to a third-party. The Secure Choice savings plan is a Roth IRA. The default investment option is a target date index fund, but participants in the program can choose from a number of different options.
The Act requires employers to distribute informational materials about the program to all employees. These program materials should be provided to employers by someone from the program, but if employers have not received the materials, they may want to contact the Treasurer’s Department, who administers the program (You can do so online by clicking here or by calling: (312) 814-8955).
Employers who are required to participate in the program but who do not do so may be subject to fines and penalties. The Secure Choice program is separate from the Illinois pension system and is designed to give private-sector employees IRAs that they can manage. Employers with fewer than 25 employees who would like to participate will likely be able to do so after the program finishes rolling out in 2019.
As mentioned above, starting November 1, 2018, employers with more than 500 employees and who are required to enroll in the program must begin enrolling employees. In July 2019, employers with 100-499 employees must begin enrolling employees, and in November 2019, employers with 25-99 employees must begin enrolling. Employers can enroll their employees by visiting the Illinois Secure Choice website at: www.ilsecurechoice.com.
Feel free to contact me if you have any questions about the Secure Choice program or would like help enrolling.