Originally scheduled for July 2017, in May the Illinois Senate and Illinois House passed a bill (HB 2360) that will delay the implementation of the Illinois Secure Choice Savings Program Act to 2018 (exact date yet to be announced pending signature from Governor Rauner). The Act requires employers with 25 or more employees that have been in business for two or more years and do not currently offer a 401k or other retirement program to offer the Illinois Secure Choice Program to their employees. This savings program would be a state-run Roth IRA account which would allow employees to determine the amount of contribution into the program (up to the current Roth IRA contribution limits) or choose to opt-out altogether.
Employees will be able to choose the investments in the account, but should the employee choose not to decide, he or she will be enrolled in a default fund based on a target retirement date at a contribution rate of 3%. Once open enrollment begins, employers subject to the Act will have nine months to ensure that all employees have either enrolled or opted-out of the program. Following the initial nine months, employers could face penalties of $250 per employee for non-compliance.
Currently, more than half of the workforce in Illinois’ private sector does not participate in an employer-based retirement plan. With Secure Choice, it is estimated that 1.2 million workers will gain access to such a retirement savings plan. The program will be managed by a private investment firm, and employers will have no liability under the program, nor will they have any responsibility in administering the program. Because of this, the cost of implementation will be minimal to the employer and will allow small businesses to retain and recruit talent in competition with larger companies that offer private retirement plans.
For more information, please reach out to our Accounting Solutions Team.