Illinois has become the first state to put in place a state-run retirement plan in which private-sector employees can participate. Gov. Pat Quinn (D) on Jan. 4 signed into law SB2758, the measure that creates the Illinois Secure Choice Savings Program.
All employers in Illinois must offer the program by June 1, 2017, if they:
- have been in operation for at least two years;
- have at least 25 employees; and
- have no employer-based retirement plan.
Unless their employers offer an employer-based plan, employees will be automatically enrolled in the state plan; however, they may opt out. All accounts will be pooled together and will be managed professionally.
There will be a 3% deduction from Secure Choice participants’ pay to be put into an IRA; however, participants will be able to adjust the percentage of their earnings that is set aside. Participants also can select an investment option from those the Illinois Secure Choice Savings Board (see below) makes available to them.
Employers participating in Secure Choice will be required to provide an open enrollment period at least once a year to allow employees who opted out of the program to enroll in it. This will be the only annual chance such employees have to do so, unless their employer allows them to do so earlier than that.
Employers that do not offer their own retirement plan and also fail to offer Secure Choice will be subject to a penalty equal to either:
- $250 for each employee for each calendar year or portion of a calendar year during which the employee neither was enrolled nor had opted out of it; or
- for each calendar year beginning after the date a penalty has been assessed regarding an employee, $500 for any portion of that calendar year during which such an employee continues to be unenrolled without having opting out.
The program will be overseen by the Illinois Secure Choice Savings Board. Four of the board’s seven members will be appointed by the governor: two with expertise in retirement savings plan administration or investment, or both, and one each representing participating employers and enrollees. Gov. Quinn will be replaced by Bruce Rauner (R) on Jan. 12; Rauner unseated Quinn in last November's election.
The transition team of Illinois Treasurer-elect Mike Frerichs (D) reportedly has been working with the program’s proponents in the legislature on implementation, and Frerichs has promised that he will solicit bipartisan input to implement Secure Choice.
Frerichs is hoping that employers with fewer than 25 employees will want to participate as well. Said Frerich in a press release, “We all have a shared interest and a shared responsibility to ensure that Illinois is competitive, and pooling our resources to help small and medium-sized Illinois employers compete in the 21st Century is an important part of that.”