Illinois Secure Choice Savings Program Expansion
In July 2021, the revised Illinois Secure Choice Savings Program Act (H.B. 0117) was signed into law. This brought important changes to the existing state-sponsored retirement savings plan and a shift in what is defined as a small business. Here is what you should know.
What is the Illinois Secure Choice Savings Program?
In 2018, the Illinois State Treasurer’s Office launched the Illinois Secure Choice Savings Program to comply with new legislation. The program’s goal is to allow employees who work for smaller privately held companies to have access to retirement savings plans. Currently, only businesses that have been around for at least two years employ over 25 employees and do not offer a qualified savings plan are subject to this act. However, in July 2021, the state approved a new act changing these qualifications.
What changes were made?
This new act amends the original program to include the following changes:
- Small businesses are now considered businesses with at least five employees (rather than 25).
- The total number of employees is determined by any quarter during the previous year.
- Requirement to automatically enroll each employee unless the employee has officially opted out.
- Automatic yearly increases in contributions up to 10%.
- Small employers can now set up payroll deductions and deposit directly into the retirement savings program on behalf of the employee. (But not required.)
Who is required to participate?
Any employer within the state of Illinois who:
- Has five or more employees.
- Has been in business for two or more years.
- Does not offer another qualified retirement savings plan. (401(k), SEP-IRA, or simple IRA)
When does this go into effect?
Registration is currently open for newly qualified businesses to enroll. Enrollment must be completed by the following deadlines based on business size:
- Businesses with 16-24 employees: November 1, 2022
- Businesses with 5-15 employees: November 1, 2023
Are there penalties for not enrolling?
Businesses that do not comply with the mandated Illinois Secure Choice Savings Program Act will be subject to penalties. These fines are per employee that has not been enrolled or opted out of the program.
- 1st year: $250 fine per employee not enrolled or didn’t opt-out of the plan. This is for the full or portion of the first calendar year of non-compliance.
- 2nd year: $500 fine per employee not enrolled or didn’t opt-out of the plan. This is for the second calendar year of non-compliance.
- Important note, the most recent act specified that the second year of non-compliance does not need to be consecutive to receive this increased penalty.
Businesses have 120 days (previously 90 days) after receiving the notice of penalty to file a protest or come into compliance.
As a reminder, the Illinois Secure Choice Savings Program Act only impacts those businesses that do not already offer their employees a qualified retirement savings plan. (401(k), SEP-IRA, or simple IRA) To verify or certify your exemption, visit the Illinois Secure Choice website and enter your EIN/TIN.
Please visit the official Illinois Secure Choice Retirement Savings Program site for full details and enrollment.