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The Illinois Secure Choice Savings Program

The Illinois Secure Choice Savings Program has been expanded to include more employers and employees and with an annual automatic increase in contributions. The expansion of the program (Public Act 102-0179) was approved by Governor Pritzker on July 30, 2021. Small employers with 5 but not more than 25 employees will be required to join the program which already includes employers with 25 or more employees. Small employers will join the program at staggered times beginning on September 1, 2022. 

Illinois became the first state to fully enact legislation requiring that private-sector employers offer their workers retirement benefits when Governor Pat Quinn signed into law the Illinois Secure Choice Savings Program Act (Public Act 098-1150) in January 2015. Introduced as S.B. 2758 by Illinois Senator Daniel Biss, the Act passed the State legislature in 2014. Supporters of the law believe most of the state’s 2.5 million private-sector workers who currently do not have retirement plans through their workplace will ultimately participate in the program. As of April 1, 2021, the Secure Choice Savings Program had 6,100 employers registered with over 85,300 participants who had a total of 55 million in savings. 

With the expansion of the program, employers with 5 or more workers who do not already offer their employees a retirement plan must automatically enroll their workers aged 18 and older in a state-run payroll-deduction Roth Individual Retirement Account (Roth IRA). The Act applies to both for-profit and non-profit employers. Employees have the option to opt out of the program or to make contributions at a different rate.

Employee contributions begin at five percent of compensation. The Secure Choice expansion provides for an annual automatic increase in contributions up to a maximum of ten percent of compensation. Although employees may select a different rate of contribution, their contributions cannot exceed the current maximum annual contribution limits for Roth IRAs. Employees choose their investments from a menu of choices established by a seven-member board, which oversees the program. Employees in the program who fail to select investments will be invested in a life-cycle fund that automatically becomes more conservatively invested as they age. Workers must pay income tax on any money contributed to Roth IRAs but, once the worker retires, he or she can withdraw money from the account tax-free. Employees are allowed to opt out at any time.

The Illinois Secure Choice Savings Board is tasked with choosing a private firm to manage the investments. The Board includes the State Treasurer, State Comptroller, director of the Governor’s Office of Management and Budget, two public representatives with expertise in retirement savings plan administration or investment, a representative of participating employers, and one representing enrollees.

Money going into the Secure Choice program is pooled in a protected fund that is separate from the state’s budget and pension funds, and that may not be used for any other purpose. No taxpayer dollars are invested in the Program. Costs are paid by participants, and the pooling arrangement is designed to keep fees low (they are capped at 0.75 percent of invested assets).

The Secure Choice Program is not intended to be an employer-sponsored retirement plan. It is a state-run program that employers facilitate. The Act does not require or allow employer matches or contributions; the employer requirement is limited to offering the Program to new workers (using materials provided by the Board), providing an annual enrollment period for ongoing employees, automatically enrolling workers who do not opt out, and depositing worker payroll deductions into the Program’s trust fund. Participating employers are not fiduciaries under the Program, and they will not be responsible for the Program’s administration or investments. They may, however, be subject to penalties if they do not comply with the Act. Penalties for noncompliance begin at $250 per employee per year initially, and increase to $500 per employee if the employer continues to be in violation of the Act. 

See FAQs on the Illinois Secure Choice Savings Program. 

Read our summary of similar initiatives in other states: State-based retirement plans for the private sector.

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