Tag Archives: Secure Choice Savings Act

Illinois Lawmakers Consider Expanding Mandatory Retirement Savings Program to Small Employers

Contributed By Kelly Haab-Tallitsch, April 30, 2021

savings, hand stacking gold coins isolated on white background

The Illinois General Assembly is considering a bill (H.B. 117) that would make several amendments to the Illinois Secure Choice Savings Program Act, including extending the requirement to offer employees a retirement savings plan to employers with 5 to 24 employees. H.B. 117 was passed by the Illinois House of Representatives earlier this month and is currently pending in the Illinois Senate.

Currently, Illinois employers that have 25 or more employees and have been in business at least two years are required to participate in the state-run Illinois Secure Choice Savings Program (Secure Choice Program) or offer another qualifying retirement savings plan to employees. H.B. 117 would lower the threshold to employers with 5 or more employees.

If H.B. 117 is enacted into law, Illinois employers that employed 5 or more employees during each quarter of the previous year, have been in business at least two years, and do not offer another retirement savings plan will be required to participate in the Secure Choice Program.

Covered employers are required to automatically enroll employees in the program and withhold 5% of an employee’s compensation (up to an annual IRS maximum), unless the employee elects a different amount or opts out of the program. Employers remit employees’ contributions to the state-run program. Those contributions are then deposited into Roth Individual Retirement Accounts (IRAs) for each participant and invested at the participant’s direction among a menu of investment alternatives. Employer contributions to the program are not permitted.

H.B. 117 includes the addition of automatic increases to employee contributions, up to a maximum of 10% of an employee’s wages, modifies penalties for noncompliance,  and makes changes to the enforcement process.

Under H.B. 117, the deadline to enroll employees would be no sooner than September 1, 2022 for employers with 16 – 24 employees, and no sooner than September 1, 2023 for employers with 5 – 15 employees. The Illinois State Treasurer’s office will notify employers directly (by mail or email) when they are required to register. Employers will receive two notifications – an early registration notice 120 days prior to the required registration date, and a second notice 30 days prior to the registration date.

H.B. 117 is still pending in the Illinois Senate, but based on the strong support for the bill, it appears likely H.B. 117 will pass and be signed into law.

Employers that offer another qualifying retirement savings plan are exempt from the Secure Choice Program. As such, small employers should begin examining the options available to determine whether implementing a qualified retirement savings plan, such as a Simplified Employee Pension, SIMPLE IRA, or 401(k) plan may be a better alternative than the Secure Choice Program.

SmithAmundsen’s employee benefits team will continue to monitor the status of H.B. 117 and provide additional information as it becomes available.

Illinois Governor Signs Bill Creating Mandatory Retirement Program for Illinois Businesses

Contributed by Kelly Haab-Tallitsch

The Illinois Secure Choice Savings Act (Secure Choice Act) was quietly signed into law by Illinois Governor Pat Quinn over the weekend.  The controversial legislation will require most businesses in Illinois to adopt a retirement savings plan for their employees by June 1, 2017.

The Secure Choice Act creates a state-run retirement savings program in which eligible workers can contribute to a Roth IRA through automatic payroll deductions from their paychecks. Employers with 25 or more employees, who do not offer another type of retirement program, will be required to offer the state-run IRA arrangement or be subject to a fine of $250 per employee per year. Employers that sponsor other types of private retirement plans, such as a 401(k) or pension plan, are not subject to the requirement or fines.

Once the Illinois Secure Choice Program is up and running – expected to be 2017 at the earliest – employees will be automatically enrolled in the program, with a default 3% payroll deduction per paycheck.  Employees will have the option to change their deduction percent or to opt out of the program entirely. Employers and the state will not make contributions to employees’ accounts.

The Secure Choice Act creates yet another set of administrative and recordkeeping requirements for small businesses. Once the program is implemented by the state, employers will be required to:

  • Set up and maintain a payroll deposit savings arrangement that provides for payroll deduction of funds from employees paychecks and deposits those funds into the program;
  • Provide employees with the state-provided information packet upon launch of the program and to new hires on an ongoing basis; and
  • Enroll all employees who don’t opt out of the program using the form provided by the state.

The Secure Choice Act provides for implementation of the program within 24 months, with the potential to delay further if the Illinois Secure Choice Board fails to obtain adequate funds to implement the program. The federal government could also delay the implementation if it determines that the IRA arrangements offered are not tax qualified or that the program is an ERISA employee benefit plan, and thus governed by federal, not state, law.

Employers affected by the Secure Choice Act should begin to examine other types of retirement plans while awaiting further information on implementation of the state program. Several options are available for small to mid-sized businesses, including IRAs, 401(k) Plans, and Simplified Pension Plans (SEP). IRS resources on retirement plans for small businesses can be found at http://www.irs.gov/Retirement-Plans/Help-with-Choosing-a-Retirement-Plan.

The passage of the Illinois Secure Choice Act makes Illinois the only state in the country with a state-run automatic enrollment payroll deduction retirement savings program for private sector employers.