Illinois’ new retirement savings program, Illinois Secure Choice, is scheduled to begin its first wave of enrollments in November.
And employers should be aware of potential legal penalties should they fail to comply with withholding requirements.
Created under a state law in 2015, Secure Choice creates retire accounts for workers employed by companies that do not already have a retirement program in place. Secure Choice began a pilot program with volunteer employers in May.
While proponents of the program have said the program is designed to be simple and convenient for the employers administering the plan, it requires employers to withhold a default rate of 5 percent of an employee’s gross compensation, up to the annual maximum allowed for IRA contributions each year as provided by the IRS. The money is then put into a Roth IRA.
Employees remain in control of their account, and can either opt to have more than 5 percent withheld, or can opt out of the program. The accounts follow employees if they change employers. Employers are not allowed to make contributions under the plan, have limited roles as facilitators and pay no fees to participate.
Joshua Rafsky, an associate attorney in the Chicago office of law firm Jackson Lewis P.C., authored a blog post to inform employers of basic information they should know as the implementation draws near.
“The implementation depends on the size of the employer, so when they have to start complying depends on their size,” Rafsky said. “That is all laid on the Secure Choice website.”
While there are certain timelines that qualified businesses must adhere to, there is nothing on the Secure Choice website that informs an employer of the possible penalties or litigation risks that an employer may face if non-compliant.
However, Radsky said, “If they (employers) don’t comply, the statute provides for potential penalties.”
According to the Secure Choice handbook, “the State will monitor compliance, reach out to employers, and provide technical assistance to help them meet deadlines and requirements. Employers who do not comply with the Illinois Secure Choice Savings Program Act may be subject to fines and penalties..."
To help employers follow the guidelines and not run afoul of the rules and regulations of the program, “both the Illinois State Treasurer’s Office and the Illinois Secure Choice Program has information on their websites,” said Rafsky.
According to the Illinois Secure Choice website, other states that have passed legislation to create similar plans include California, Connecticut, Maryland and Oregon. Oregon’s program, OregonSaves, has already been implemented, and many other states are also considering similar legislation.