Illinois Has a New Retirement Program: The Illinois Secure Choice Savings Program

Coin jar labeled "Retirement"

This program requires that all Illinois employers begin offering the Illinois Secure Choice Savings Program if they do not already offer a retirement plan to their employees. Any company that meets the criteria below will be required to register:

  • Has 25 or more employees (includes both full-time and part-time employees)
  • Has been in operation for at least 2 years
  • Does not offer an employer-sponsored retirement plan

The Illinois Secure Choice Program requires eligible employers to enroll its employees in a default Target Date Roth IRA with a 5% default payroll deduction. The employee may change the deduction amount or opt out of the plan at any time.

The New Illinois Secure Choice Program Will Launch in Three Waves

  • Wave 1: November 1, 2018 (Employers with 500+ employees)
  • Wave 2: July 1, 2019 (Employers with 100 - 499 employees)
  • Wave 3: November 1, 2019 (employers with 25-99 employees)

At the start of each Wave and after each subsequent employee hire thereafter, the employer has 30 days to enter and enroll its employees in Illinois Secure Choice, and then another 30 days to start the payroll deductions for the employees. Any employee who does not specifically opt out of the program will be automatically enrolled.

Illinois Secure Choice is Limited in a Number of Important Ways

  • Contribution Limitations: Participants can only contribute $6,000, and there are no employer contributions allowed.
  • Wage Phaseouts: Participants over certain income levels lose their ability to contribute to the program.
  • Few Investment Options: Participants are limited to a handful of investment choices, all at a comparatively high expense ratio.
  • No Tax Benefit for Employers: Employers will need to dedicate time and resources to the administration of the program, but will receive no tax benefit.

Additionally, any employer who is an “eligible employer” and who does not register for the Secure Choice Program, will be subject to penalties of $250 per employee for noncompliance during the first year. The penalty jumps up to $500 per employee for subsequent years. Additional penalties will be assessed for failure to remit deductions timely.

Example: An eligible employer with 25 employees who does not register for the program will be hit with a $6,250 penalty in year 1. The penalty will jump to $12,500 in year 2.

Employers who meet the criteria above may avoid enrolling in the Program by implementing a customized employer-sponsored retirement plan. Porte Brown LLC can help you with this process.

Contact Porte Brown's Retirement Benefits Practice Group leader Antonino Bondi at 847-956-1040. We will help evaluate, design, and implement the best retirement plan for your company.

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