Illinois Governor Pat Quinn signed legislation over the weekend enacting the Illinois Secure Choice Savings Program and making Illinois the first state in the nation to require covered employers to provide employees with access to a retirement savings program.
Starting in 2017, private employers with more than 25 employees who have been in business for more than two years will be required to automatically enroll their employees in a state-run IRA program if the employer does not offer access to a private workplace retirement plan. Participant employees will automatically contribute 3 percent of their paychecks, but will be free to change their contribution level or opt out at any time. Employers who do not offer the state-run, auto-IRA program or other type of private retirement plan will be subject to a fine of $250 per employee per year.
Although the state will choose a private investment company to manage the program, employers will be responsible for establishing and administering the payroll deduction through their existing payroll systems. Employers are not eligible to contribute to the auto-IRA program.
Despite Governor Quinn's signing of the legislation, implementation of the Illinois Secure Choice Program could be blocked or delayed. The legislation specifically states that the Illinois Secure Choice Program could not be implemented if the federal government determines that: (1) the IRA arrangements are not tax qualified; or (2) the program is an ERISA employee benefit plan. Implementation also could be delayed as the state raises adequate financial support to fund the program.
If you have questions about updating your organization's policies and procedures with respect to the auto-IRA program, please contact a Faegre Baker Daniels employment lawyer.