New IL Small Employer Obligation to Offer IL Retirement Plan
Starting in 2017, private employers (for profit and not-for-profit) with more than 25 employees in Illinois 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. The fine increases to $500/employee in subsequent years.
Employers with 25 or fewer employees or in business for two years or less may offer the program. An employer is required to deposit employee payroll deductions into the program’s trust fund, which will be run by a state-appointed board of directors comprised of seven members. A participating employer is not a fiduciary under the program, and is not intended to be responsible for the program’s administration or investments.
The legislation adopting the Illinois Secure Choice Savings Program was only signed into law the first week in January 2015. Some reports indicate it may be subject to challenge in the courts so stay tuned.