If your company does not offer a retirement plan and you haven’t registered for the Illinois Secure Choice program, you may be at greater risk of penalty next year. Avoid any unnecessary fines by understanding the program requirements and all your options.
Secure Choice is a state law that requires companies with more than 25 employees to use the state program or provide their own qualified retirement savings plan. While all the original Secure Choice deadlines ended before the pandemic, employers affected by COVID-19 were allowed to delay program enrollment and compliance notices were temporarily paused. Enforcement of financial penalties is starting at $250 per employee in 2021, increasing to $500 per employee in subsequent years.
As of November 2020, more than 75,000 employees in Illinois are participating in the program. Enrolled employers are required to withhold 5% of employee’s after-tax compensation (up to maximum allowable provided by the IRS), remit the withholdings to Secure Choice and provide census data. Employers cannot opt out of the program unless they are exempt. To be exempt, your company must:
- Have less than 25 employees;
- Have been in business for less than two years; or
- Already offer an employer-sponsored retirement plan
For non-exempt companies with 26-499 employees, you are required to offer a retirement savings option or be forced to use the state program. Participating employers must:
- Distribute information that’s been provided by Secure Choice Program
- Facilitate employee enrollments
- Set up payroll deductions
- Remit employee deferral contributions
Employers must work within the established structure of the program. Participating employers do not:
- Make employer contributions
- Pay any administrative fees
- Act as the plan manager or fiduciary
- Have any obligations under ERISA as it relates to the program
Full- and part-time employees are eligible, but not required to participate in the program. Seasonal employees are also eligible, if they work for the employer for more than 60 days. Employees have 30 days if they decide to adjust their deferral percentage or opt out of the program.
Retirement programs offer a great way to show employees you value them. Instead of being required to use Secure Choice, however, you can customize a program to your company and employees’ unique needs. Historical barriers for small and medium-sized companies wanting to offer a 401(k) are eliminated when partnering with a professional employer organization (PEO). When creating your own, you can establish the waiting period, choose the fund offering and decide whether or not you want to make a tax-deductible contribution. Employees will feel more engaged in supporting your company’s success when they feel like you’re investing in their financial future.
MidwestHR, a leading certified professional employer organization (CPEO) in Illinois, waives the typical set-up fee and yearly administration costs for our clients who offer 401(k) programs. As fiduciary, we manage most responsibilities so there’s reduced liability for you. We can help you develop a 401(k) plan that’s flexible, affordable, reflective of your core values and meets the state requirement. Give us a call at 630-836-3000 to learn more.