The Illinois Secure Choice Savings Program has been delayed. A pilot program is anticipated to begin in 2018 with enrollment beginning in phases in 2018 and 2019. Dates and information are not ready available as the Senate moved in a vote in May of 2017 to roll back an Obama-led Department of Labor rule that was supposed to insulate states and small companies from the threat of lawsuits related to the Employee Retirement Income Security Act (ERISA). The the Illinois State Treasurer is moving forward with putting the program in place, other legal actions are currently in the works. There have also been changes to the Act since its original adoption, including increasing the employee default contribution from 3% to 5%.
MidwestHR will provide additional information as it becomes available.
While Illinois small businesses are still figuring out the new overtime pay regulations, there’s another new law looming. Effective June 1, 2017, the Illinois Secure Choice Savings Program Act (SB2758) requires private-sector employers to offer retirement benefits with a state-run payroll-deduction Roth Individual Retirement Account (Roth IRA). Its goal is to increase retirement savings and reduce poverty among retirees. Funds contributed are considered private property and not available to the state. Learn how the new law will impact your business.
Companies affected by SB2758
The law applies to profit and non-profit employers in Illinois if:
- Employer has been in operation for 2 or more years
- 25 or more workers are employed (companies with fewer than 25 workers can participate on a voluntary basis)
- No employer-sponsored retirement plan is currently offered
Illinois employers already offering an employer-sponsored retirement plan are exempt from the new law.
Requirements for non-exempt employers
Designed to impose minimal burdens on employers, the State of Illinois has appointed a seven-member board to oversee the selection of investments and administration. This eliminates any fiduciary responsibility for employers. Also, employer contributions are not required.
That leads us to employer responsibilities. The law mandates employers must:
- Alert staff of the program and automatically enroll them into the state retirement savings plan by 6/1/17.
- Hold an annual open enrollment period for any employees who opted out.
- Administer payroll deductions and deposits into Secure Choice accounts.
Educate your employees
Employees will be automatically enrolled at three percent of pay and can select from a menu of investment options. They can also adjust their contribution or opt out at any time. Contributions cannot exceed Roth IRA maximums ($5,500 for workers under age 50 and $6,500 for those older). Money contributed is taxed, but retired employees can withdraw the money tax-free. Program offers automatic defaults for any participants who don’t select investments.
Non-exempt employers must have a plan in place to comply with the new law or they will risk noncompliance penalties: $250 per employee per year initially which increases to $500 per employee if the employer continues to be in violation of the Act.
Another way to avoid penalties is by offering an employer sponsored retirement plan that can help attract and retain top talent. MidwestHR is a leading Illinois PEO that helps small to mid-sized companies customize 401K plans that are flexible and affordable. Our experience has shown many companies prefer retirement plans reflective of their core values and want to avoid being forced into a government-mandated pilot program. By outsourcing retirement services, MidwestHR manages all administrative responsibilities and protects businesses from changing legal requirements. Currently accepting new clients.