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Employers Alert: Your Obligations Under Illinois' Secure Choice Expanded Retirement Savings Law

The landscape of employee retirement benefits underwent a significant transformation in Illinois in 2023. In a significant move to boost retirement savings among workers, Illinois expanded its Secure Choice Savings Program in 2023, which now requires more employers than ever to participate in providing retirement savings options to their employees. This article aims to provide employers with an updated understanding of the law and their new obligations.


Which Businesses are Subject to the Secure Choice Expanded Retirement Savings Law?


Previously, only businesses with 25 or more employees were subject to the Secure Choice Savings Program. However, as of 2023, the law was amended to now include businesses with just 5 employees. This means a larger number of small businesses must now comply with the new regulations​​​.


What Does the Secure Choice Savings Program Require of Businesses?


Under the 2023 version of the law, businesses with at least 5 employees that have been operating for two years or more and that do not offer a retirement plan must now automatically enroll their employees in a state-run program that offers a qualified retirement plan to those employees. It is important to note that employers are required to automatically enroll eligible employees in a Roth IRA-style retirement plan, which has a standard 5% payroll contribution. Employers are not required to act as plan fiduciaries, nor do they have to contribute to the plan. Their primary responsibilities are to register for the program, provide the program with their employee information, and facilitate payroll deductions should the employee choose to enroll in the qualified retirement plan.


Do Employees Have to Participate in the Secure Choice Savings Program?


Employees have the flexibility to adjust their contribution rates or even opt out entirely if they choose. However, irrespective of whether the employee chooses to participate in the program, the employer is required to register their employees in the state-run qualified retirement plan.


What Happens if a Business Fails to Comply with the Secure Choice Savings Program?


The first-year penalty for failing to enroll employees is $250 per employee. For subsequent years, the penalty increases to $500 per employee. Non-compliance does not need to be consecutive to qualify for the higher penalty. Thus, the penalties for non-compliance can be significant.


What Should Businesses Do?


Review your business size to confirm if you fall under the new criteria. If it does, prepare for the automatic enrollment process, including understanding the default 5% contribution rates and options for employees to opt out. Communicate clearly with employees about the new retirement savings program, their rights, and the benefits of participation. If the employee fails to opt out, take necessary steps to comply with the program to avoid the stipulated penalties.


The expansion of the Illinois Secure Choice Retirement Savings Program in 2023 represents a significant change in retirement savings for employees, especially in smaller businesses. It is crucial for employers to understand and comply with these new requirements to ensure their employees' financial well-being and to avoid penalties. Employers are advised to seek legal counsel for specific guidance and to navigate the intricacies of this law.

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