Illinois Secure Choice Retirement Savings Program

Employers who have five or more employees and have been in business for at least two years are required to offer Secure Choice or another retirement plan to their employees. If you don’t conduct business in Illinois, you should learn which other states have retirement plan mandates (there are 16 so far).

What is the Illinois Secure Choice Act?

Illinois Secure Choice, a state-sponsored retirement savings program, launched in 2018 and gives workers across Illinois access to Roth IRAs. 

The program is open to employees who work for an eligible employer, as well as anyone who wants to enroll on their own. As of 2022, the plan covers all employers who have five or more employees. The registration deadline is November 1, 2023 for businesses with five to 15 employees.

What are the main benefits of the Illinois Secure Choice Savings Program?

Secure Choice offers a number of advantages over traditional retirement plans, including:

• Automatic enrollment: Employees are automatically enrolled in the program within the first 30 days of their employment at a default savings rate of 5% of their paycheck. They can opt out of the program and opt back in at any time, and they can change the rate they contribute.
• Low fees: The program has low fees, which means that more of your money goes into your retirement savings.
• Flexibility: You can choose how your money is invested. Savers can choose from a variety of investment options, including stocks, bonds, and target-date funds.
• Portability: Your account is portable, so you can take it with you if you change jobs.

Who is required to provide the Illinois Secure Choice plan?

Employers with five or more employees who have been in business for at least two years are required to offer Secure Choice or another retirement plan to their employees. 

However, employers with fewer than five employees, have been in business for less than two years, or who already offer an employer-sponsored retirement plan are exempt from the program. 

If you are interested in a great alternative to Illinois Secure Choice, contact our team at Penelope for affordable 401(k) plans for your small business or nonprofit organization.

Here is a table summarizing the requirements for employers to provide the Illinois Secure Choice plan:

If you are an employer with five or more employees and have been in business for at least two years, and you do not offer another retirement plan, you must offer Secure Choice to your employees. 

What are the pros and cons of Illinois Secure Choice?

Here are some of the pros and cons of the Illinois Secure Choice program:

Illinois Secure Choice Pros:

• Automatic enrollment: Employees are automatically enrolled in the program at a default savings rate of 5% of their paycheck. This can help people who are not already saving for retirement get started.
• Low fees: The program has low fees, which means that more of your money goes into your retirement savings.
• Flexibility: You can choose how your money is invested. You can choose from a variety of investment options, including stocks, bonds, and target-date funds.
• Portability: Your account is portable, so you can take it with you if you change jobs.
• No employer cost: There is no cost to employers to offer Secure Choice to their employees.

Illinois Secure Choice Cons:

• Limited investment options: The program offers a limited selection of investments, which may not be appropriate for all investors.
• Potentially higher fees for employees: There is no cost to employers to offer Secure Choice; however, employees do pay approximately $0.75 per year for every $100 in their account, depending upon their investments. While different 401(k) plans charge different fees, some plans have lower employee fees.
• Income limits: If employees earn too much, they are not eligible for the program. It's also not an effective vehicle for those who are close to retirement.
• Contribution limits: The IRS puts a limit on how much you can contribute to a Roth IRA. In 2023, the limit is $6,500/yr (under age 50) or $7,500 (age 50 or older).

What are the penalties for not enrolling in Illinois Secure Choice

Employers who do not comply with the Illinois Secure Choice Savings Program Act may be subject to fines and penalties as described in 820 ILCS 80/85. The penalties are as follows:

• For the first year of non-compliance: $250 per eligible employee.
• For each subsequent year of non-compliance: $500 per eligible employee.

Eligible employees are those who are not offered a retirement plan by their employer.

The penalties are enforced by the Illinois Department of Revenue (IDOR). IDOR will notify employers of non-compliance and demand payment of the penalty. If the employer fails to pay the penalty, IDOR may take further action, such as filing a lien against the employer's property.

Employers can avoid penalties by either offering Secure Choice to their employees or by offering another retirement plan that meets the requirements of the Illinois Secure Choice Savings Program Act.

Here are some additional things to keep in mind about the penalties for not enrolling in Illinois Secure Choice:

• The penalties are per eligible employee, not per employee. For example, if an employer has 100 employees, and 50 of those employees are eligible for Secure Choice, the employer would be penalized $12,500 for the first year of non-compliance.
• The penalties are cumulative. This means that if an employer is non-compliant for two years, they would be penalized $250 per eligible employee for the first year, and $500 per eligible employee for the second year, for a total of $750 per eligible employee.
• The penalties are not waived if the employer is later able to offer Secure Choice or another retirement plan to their employees.

The deadlines for enrolling in Illinois Secure Choice vary depending on the size of the employer.

• Employers with 500 or more employees: November 1, 2018
• Employers with 100 to 499 employees: July 1, 2019
• Employers with 25 to 99 employees: November 1, 2019
• Employers with 16 to 24 employees: November 1, 2022
• Employers with 5 to 15 employees: November 1, 2023

Employers who miss the deadline for enrolling in Illinois Secure Choice may be subject to penalties. The penalties are $250 per eligible employee for the first year of non-compliance and $500 per eligible employee for each subsequent year of non-compliance.

Eligible employees are those who are not offered a retirement plan by their employer.

Employers can avoid penalties by either offering Secure Choice to their employees or by offering another retirement plan that meets the requirements of the Illinois Secure Choice Savings Program Act.

FAQ

Is Illinois Secure Choice legally mandatory?

Yes, the Illinois Secure Choice Savings Program Act is legally mandatory for Illinois employers that have been in business for at least 2 years,have five or more employees, and that do not offer another retirement plan. 

The law requires employers to either offer Secure Choice or another retirement plan to their employees. If an employer does not offer Secure Choice or another retirement plan, they may be subject to penalties of $250 per eligible employee for the first year and $500 per eligible employee for each subsequent year.

How much does Illinois Secure Choice cost?

The Illinois Secure Choice program has an annual asset-based fee of approximately 0.75%. This means that you will pay approximately $0.75 (75 cents) per year for every $100 in your account. The fee covers all administrative costs, including maintaining your account, oversight of the program's investments, providing customer service, keeping records, and online and phone services.

The fee is charged to all participants, regardless of their income or the amount of their contributions. The fee is not waived if you are eligible for a government pension or other retirement benefit.

The Illinois Secure Choice program is a low-cost way to save for retirement. The annual asset-based fee is lower than the fees charged by many other retirement plans.

Here is a table summarizing the fees for the Illinois Secure Choice program:

Get a better alternative for Illinois Secure Choice Plan

Would you like to offer your employees affordable and straightforward 401(k) retirement plans?Get Started.