As of November 1, 2019, the Illinois Secure Choice Savings Program Act (more commonly known as Secure Choice) will require all businesses with over 25 employees that have been operating for more than two years to offer their employees access to a qualified retirement savings account.
This marks the final phase of the state-sponsored retirement plan requirement which rolled out in November 2018 starting with businesses over 500 employees, then businesses 100 to 499 employees, finally businesses with 25 or more W2 employees as reported to the Illinois Department of Employment Security (IDES).
Here’s what small businesses should know about the Secure Choice requirement.
What Is Secure Choice?
Secure Choice was created to help Illinois residents prepare for retirement. This new program will give an estimated 1.2 million Illinois workers mandated access to employer-facilitated retirement savings plans. This is great news, as even the Social Security Administration recommends that you shouldn’t plan to live solely on Social Security benefits in your golden years.
Employers who meet this criteria (over 25 W2 employees, operating over two years) should receive notification by the state of Illinois to register for the mandated retirement savings program.
For businesses with no existing retirement savings plan for their employees, you can enroll your employees in the Secure Choice default, a target date Roth IRA with a default five percent payroll deduction. Employees are welcome to change their contribution level, modify their fund options, or opt out at any time.
Retirement savings accounts through Secure Choice are owned by individual participants and are portable, should employees choose to change jobs.
What Employers Need to do to be Compliant with the Secure Choice Mandate.
To recap, if you own or operate a business that has issued more than 25 W2’s in the last year and has been operating for over two years, you are required to offer qualified retirement plan to employees in Illinois.
However, businesses are not required to use the state sponsored Secure Choice savings plan. Any qualified retirement plan that fall under sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), and 457(b) of the internal revenue code will meet the state’s requirement.
If you receive a notification and you already have a retirement savings plan in place, you are exempt from this mandate but you are required to login and inform the state. To do so, you need your employer identification number (EIN) and the access code included in the notification you received.
Employers who do not comply face penalties of $250 per employee for the first year and $500 per employee for each subsequent year.
If you do NOT yet offer a qualified retirement plan, you’re obligated to:
Find a qualifying retirement plan to offer your employees - Secure Choice or any of the others listed above.
Login to the Secure Choice site and register your status.
Distribute information and materials on your retirement plan your employees.
Facilitate employee enrollment in this program or the retirement plan of your choosing.
Arrange appropriate payroll deductions.
Remit employee deferral contributions in a timely manner.
You are not required to make any employer contributions or pay administrative fees on these retirement accounts, nor are you obligated to act as a plan fiduciary or manager.
How CognosHR Can Help
If you are interested in offering an alternative retirement savings plan, like a 401k, CognosHR make it super easy for any small businesses to do so by providing access to our large group 401(k) plan offerings. If you are a current CognosHR client and receive a notification from the state, please reach out to our team and we will help with next steps.
The Future Is Better Retirement Planning
Research shows that employer-run savings plans that automatically deduct savings help people save more. It’s significant that employees are 15 times more likely to save for retirement if their employer offers a retirement benefit option.
Employees appreciate the help saving, and now that it’s required of many businesses in Illinois, more and more employees will come to expect it.
Whether or not your organization is impacted by Secure Choice, don’t hesitate to contact us for more information about the retirement plan options and benefits that may be best for your employees.