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Illinois Becomes the First State to Require Automatic Retirement Savings Program for Workers Without Access to a Workplace Retirement Plan


January 2015

On January 5, 2015, outgoing Governor Quinn signed landmark legislation that created the “Secure Choice Savings Plan” which will give Illinois workers who do not have the option to participate in a workplace retirement program the opportunity to defer salary contributions to an IRA. Once established, certain Illinois employers will be required to automatically enroll employees in a Roth-style individual retirement account at a default rate of 3% of salary. Under the legislation, workers will have the opportunity to opt out of the program or change their salary deferral rate at any time. Participants will have the ability to direct their salary deferrals to a variety of investment options that the program’s board of directors will establish in an upcoming implementation period.

All Illinois employers (including non-profits) with 25 or more Illinois-based employees who do not sponsor a workplace retirement plan, and which have been in existence for more than two years, will be required to enroll their employees in the program. To be clear, the Secure Choice program will not require employers to establish a separate retirement plan. Indeed, the legislation mostly limits employer involvement to setting up employee deductions and remitting participant contributions to a centralized Secure Choice Savings plan that is administered by the State of Illinois. Employers will, however, be subject to penalties for failing to timely enroll eligible employees in the program.

The law is effective June 1, 2015 and requires the State of Illinois to appoint a board of trustees, select investment options, establish administrative procedures, and begin the enrollment process within two years of that effective date. Whether the Secure Choice will move from implementation to reality is still unclear. The legislation directs the program’s board of directors to stop implementation if the program fails to receive an opinion from the Department of Labor that exempts the State and participating employers from coverage under ERISA. The board of directors is similarly required to get an opinion from the IRS as to whether the program will receive favorable treatment under the Internal Revenue Code, and must halt the program if the IRS does not approve the arrangement. Given the two-year implementation window and the federal approval process, it could be many months before employers need to start remitting employee salary deferrals to the program.

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