On January 4, 2015, the Illinois Secure Choice Savings Program was signed into law making Illinois the first state to enact legislation requiring that private-sector employers offer their employees options for retirement. The Program becomes effective on June 1, 2017 and will allow employees to contribute to an individual retirement account (IRA) through automatic deductions from their paychecks. The Program will be overseen by the Secure Choice Savings Board and the retirement accounts will be managed by a private firm.
Who Is Required To Participate In The Program: A business which: (i) has twenty-five (25) or more employees; (ii) has been in business for at least two years; and (iii) doesn’t currently offer an employment-based retirement plan for its employees will be required to participate in the Program. Any business that has fewer than twenty-five (25) employees or has been in business for less than two years may choose to participate in the Program. Businesses already offering a retirement plan to their workers cannot participate.
What Happens If A Business Does Not Enroll: Once the Program is open for enrollment, employers will have nine (9) months to ensure that all of their employees have been automatically enrolled or have opted out of the Program. Any business which is required to enroll its employees in the Program and fails to do so faces fines and fees. Penalties for noncompliance start at $250 per employee per year and increase to $500 per employee after the first year.
How Are Employees Enrolled in the Program: Employers will be provided with an information packet to distribute to their employees. Employers will be required to automatically enroll each employee who has not opted out of the Program using the form provided by the State of Illinois. During enrollment, each employee may choose an account type and determine their level of contribution. For the employee who chooses the default option, she or he will contribute three percent (3%) of each paycheck to their chosen retirement account. A worker can change her or his investment amount at any time. Each business will perform this enrollment process for all existing employees once the Program is established, an annual enrollment period for on-going employees and thereafter for newly hired employees.
What Happens if an Employee Leaves: The employees retirement accounts are portable and can be taken with by an employee when they leave. The employee is simply required to take their account number to their new employer and establish a new payroll deduction. Similarly, an employee who works for two separate companies can use the same account number for a payroll deduction at each job.
What Are The Employers Obligations: As employers are not allowed to contribute to their employees’ retirement plans, the cost to the employer is minimal. It is the responsibility of the employer to establish a system to facilitate the process of transporting the payroll deduction to the employee’s retirement account. Participating employers are not fiduciaries under the Program, and are not responsible for the Program’s administration or investments.
Should you have any questions about the Illinois Secure Choice Savings Program, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.
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