Registration for the Illinois Secure Choice retirement savings program is now in effect for employers that do not already offer an employer-sponsored retirement plan.
You may have already received an email or letter notifying you that you must register your business. This program is not something that you can ignore as there are penalties for noncompliance. The penalty might be $250 per employee for the first year and $500 per employee for each subsequent year.
In general, you must register for Illinois Secure Choice if you have workers in Illinois and meet the following criteria:
- Have 25 or more employees.
- Have been in business for at least two years.
- Do not already offer an employer-sponsored retirement plan (such as a 401K, SEP plan or SIMPLE IRA).
Full-time and part-time employees are eligible for this retirement savings program. Seasonal employees are eligible only if they work more than 60 days. You need not offer the program to full-time students or those in a work-study program.
The purpose of this state-sponsored retirement program is to encourage your employees to save for their future. It is also intended to help small businesses attract and retain good employees by being able to offer a retirement savings plan. Employees are simply putting their money in a Roth IRA account, set up and maintained by Illinois Secure Choice. There are zero employer fees charged to you. All you need to do is pass information along to your employees and handle the payroll deductions.
Depending on the employer’s total number of employees, the mandatory program is phased in over three key dates: 1) the Notification of Registration Date, 2) the Employee Registration Date and 3) the date payroll deductions first begin.
1) The Notification of Registration Date
The State will notify you directly when you are required to register in accordance with the following schedule:
- Employers with 500 or more employees – Should have registered by November 1, 2018
- Employers with 100 to 499 employees – Must register by July 1, 2019
- Employers with 25 to 99 employees – Must register by November 1, 2019
The registration process can be done online or manually via mail. The amount of time this takes depends on how many employees you have and whether you can do a bulk upload (consult with your payroll tax company for this option). Once your business is registered, Illinois Secure Choice will make materials available online, which you can provide to your employees electronically or by printing out the materials.
2) The Employee Registration Date
Employers have 30 days after the initial registration to enroll employees. The program requires a default savings rate of 5% of employee compensation (up to the annual maximum for IRA contributions each year). The employee can opt out of the program entirely or change the percentage of his or her Illinois Secure Choice withholding. It is within these 30 days, employees need to elect whatever changes desired, and employers must report to the State.
3) Payroll Deductions Begin
Employees will see their initial contributions beginning with the first payroll 30 days after enrollment and with each payroll thereafter.
For example, an Illinois employer with 250 employees must register on July 1, 2019. Following registration, the employer must enroll all of its eligible employees by July 31, 2019. It is during this 30-day period, employees must make any changes to their savings elections (including opting out entirely) or retain the automatic 5%. Employees will see their first savings deductions from their paychecks with the first payroll after August 30, 2019 (30 days after July 31st).
New Hires
Once a business is registered (required during the above phase-in period), it will only have employee enrollment to administer on a going-forward basis. Employers have 30 days from the date of hire to enroll new employees in the program or accept their opt-out. Payroll deductions will begin with the first payroll 30 days after enrollment.
Limited Employer Role
Aside from enrolling your business in the Illinois Secure Choice Retirement Savings Program, distributing materials to your employees, facilitating employee enrollments, setting up the appropriate payroll deductions and remitting the employee deferral contributions – there is no further involvement for you as the employer. You do not have to make any matching contributions, there are no administrative fees to pay, you don’t have to act as a plan manager or fiduciary and there are no reporting requirements (such as when a plan is covered by ERISA).
If you would like more information about this program and your obligations as an employer, please feel free to contact our office. Alternatively, further information about the Illinois Secure Choice program is available at www.ilsecurechoice.com or Secure Choice FAQs.
