Does your business need to register?
Many states have imposed state-mandated plans in response to the retirement savings crisis many retirees face across the U.S.. Fourteen states currently have plans, while more than 30 states have considered legislation on such state-mandated plans.
Illinois will now require employers with 5 or more employees who have been in business for more than two years to offer their own retirement program or facilitate the state-offered Secure Choice plan. The deadline to enroll is November 1, 2023.
History and Deadlines
Beginning November 1, 2018, employers of more than 500 employees were required to offer the program if they did not offer another employer-sponsored plan. Employers with more than 100 employees were required to register by July 2019, and those with more than 25 employees had a deadline of November 1, 2019, to offer a plan or enroll in the Illinois Secure Choice program. Employers with more than 15 employees were required to register by November 1, 2022, and employers with 5 or more employees will face a November 1, 2023 deadline.
The Plan
Illinois Secure Choice is a simple retirement savings program for employers with more than 5 employees that do not already offer a retirement plan in place. Employers only need to register with Secure Choice and maintain the account by adding and removing employees. There are no fees to employers and no matching contributions. The only requirement is to deduct the employee deferral from their payroll if they do not opt out of the plan. There will be a ROTH IRA automatically set up for each employee. Employees have 30 days to participate or opt out of the program. They will be automatically enrolled in the program if they do not select any option. The automatic default savings rate is 5% of gross pay. Employees can change that rate once they enroll.
Employers should be notified by the state that they are eligible to register and will provide a PIN. However, we recommend employers who meet the qualifications should not wait for the state to initiate contact. They can go online and request a PIN and get registered.
Penalties for non-compliance
While this plan has been in place for some time, Illinois has not acted on enforcement because of the pandemic. Enforcement for non-compliance will begin after the November 2022 deadline. Penalties can be up to $250 per employee for the first year and $500 for the second year.
How can DHJJ help?
If you have questions on this program or are required to register, please contact your DHJJ Advisor for more information. Your DHJJ Advisor can advise on other retirement plan options that may suit your needs and offer more flexibility.
