Governor Quinn recently signed into law the Illinois Secure Choice Savings Program Act. The stated purpose of this Act is to promote greater retirement savings for private-sector employees in a convenient, low-cost, and portable manner. The Act requires employers, with 25 or more Illinois employees, who do not offer a retirement plan to automatically withhold 3% of an employee’s compensation as program contributions. Employers with fewer than 25 employees may elect to participate in the program if they wish.
While plan participation is mandatory for employers, it is not intended to be an employer-sponsored retirement plan; rather it is a state run program that employers facilitate. Additionally, it is intended that the administrative burden to employers be limited to taking payroll deductions. The Program will provide information packets and disclosure forms on the benefits and risks, mechanics on how to make contributions, how employees may opt out or adjust their level of contributions to other than 3%.
Employee’s contributions will fund a Roth Individual Retirement Account within the Program. The default investment choice is a life-cycle fund with a target date based upon the age of the employee; however, the employee may choose other funds offered by the Program.
The Act is effective June 1, 2015; however, because of the work necessary to create the Program, implementation of the Program and enrollment of employees will begin within 24 months of the effective date, and the employer mandate will not begin until the Program is open for enrollment. Once open, the Act provides for penalties, against the employer, of $250 per employee per calendar year during which the employee was not enrolled in the Program nor had elected out of participation. The penalty may increase to $500 per person after the date the initial penalty has been assessed.