This week we turn our focus to the home of Lincoln, the great state of Illinois, as well look at state-run retirement programs. For a little history, check out our posts State-Run Retirement Options in the Works and last week’s IRA Provider State-Run Retirement: A Look at California's Retirement Program).
Illinois passed the bill SB 2758 into law in January 2015, giving the state 24 months to implement a program (longer if there was a funding issue). The Illinois Secure Choice Savings Board was established in August 2015 and has been meeting monthly. Since then several sub-committees have been formed and the program is moving forward, with implementation planned for June 1, 2017.
The goal of the Illinois Secure Choice Savings Program is to provide mandatory Roth IRA account for private sectors who work for profit or nonprofit organizations with at least 25 employees and that do not already offer a retirement plan (or offered one within the last two years). This amounts to between 2 and 2.5 million private sector workers. Small businesses with less than 25 employees may voluntarily participate in the program.
At least 3% of wages will be deducted from payrolls, with employees having the option to deduct more or opt out. Those assets will be pooled together and professionally managed by an investment firm. These funds will be guaranteed privately, meaning that neither state nor employees will be responsible for liabilities.
Qualifying employers have nine months after the implementation of the program to distribute information about the program to employees and start deductions. New employees will be enrolled as they begin from then on, and employers are not permitted to make financial contributions to the accounts. If at any time an employer chooses to offer its own retirement plan, they can do so without penalty.
For more information, read the Secure Choice Fact Sheet provided by Illinois State Treasurer Michael W. Frerichs.