Illinois is breaking ground with legislation, called the Illinois Secure Choice Saving Program, that requires employers to provide qualified retirement plans for their employees. Although it is still under review, the plan is scheduled to take effect in 2017. The state-sponsored Roth IRA plan will apply to all organizations that have 25 or more employees, have been in business for at least 24 months and do not yet have an established, qualified retirement plan in place.
According to the legislation for the Illinois Secure Choice Saving Program, employees would be automatically enrolled in the retirement plan with 3% of their gross wages being automatically deducted from payroll and then invested into the plan. However, employees do have the ultimate choice with this plan. They can choose to contribute more than 3%, manage their investment funds, or opt out of the retirement plan completely.
While employees are not required to contribute to the funds, it is still the responsibility of the employer to notify employees about the various options of the plans and to administer the payroll deductions. It is important to clarify that employers are not held responsible if the employee chooses not to participate, however there are penalties for failing to enroll employees who do not formally opt out. There will also be penalties for employers who make their deposits late or don’t pay the withheld funds at all.
The Illinois legislation is currently under review by the US Department of Labor. There may be some fine-tuning before 2017, but assuming Illinois leads the way with this mandate for retirement savings, you can expect to see other states follow suit soon. Check back with Optimum Solutions for updates!