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Illinois retirement plan mandate expands further for companies employing 16 or more

Nov. 1 initiates next-level Secure Choice requirements for employers


A few years back, legislators and leaders throughout the country recognized that there was a retirement savings crisis brewing. 

The state’s response: Implementation of a mandated retirement plan in 2018 known as Illinois Secure Choice.

When it was first rolled out in 2018, companies with 500 or more employees were required to either participate in the state’s program or offer a qualifying one of their own. The mandate soon evolved to require companies of 25 or more employees and is now required by those with 16 or more employees. 

Starting Nov. 1, 2022, employers with 16 or more employees that have been in business for two or more years, and who do not currently provide a retirement plan, must either offer a qualified plan, or automatically enroll employees into Secure Choice. 

And by Nov. 1, 2023, the state mandate evolves one last time, requiring Illinois employers with 5 or more employees to offer retirement plans or participate in the state’s program. 

Craig Toberman with Toberman Wealth, LLC, said, “With the program targeting businesses with 16 or more employees beginning November 1, it still makes sense at this level to take a close look at the tradeoff between implementing the baseline ‘automatic IRA’ required by the Illinois Secure Choice program or just going ahead and implementing a standard 401(k) plan.” 

“Once an employer’s administrative labor costs are considered for the state program, many business owners find that skipping this step and moving straight to an entry-level 401(k) plan makes the most sense for their business and company culture,” Toberman added.

Qualifying retirement plans that businesses can offer themselves, thereby allowing them to opt-out of Illinois Secure Choice, include a 401(k), 403(b), SEP-IRA or Simple IRA. 

When registering for the state’s program, employers must provide employee information so accounts can be created to facilitate payroll contributions. However, unlike a traditional retirement plan, employers will not be considered plan fiduciaries, do not pay any fees, do not make contributions into the accounts, and are not responsible for plan paperwork or administration.

The penalties faced by companies for not complying with the mandate are stiff. Initial penalties of $250 per employee will be followed with an added $500 per employee for each year that non-compliance continues.

Passed in June 2015, the Act first required that a state-sponsored retirement savings plan be implemented within 24 months. However, that date was pushed out to November 2018. The expansion of the mandate passed in July 2021 lowered the employee threshold, added the annual automatic increases, and made the $500 penalty applicable to those with non-consecutive years of non-compliance. 

Those with 25 or more employees were already required to comply, which means they must have automatically enrolled employees who did not specifically opt out; arrange for payroll deduction and deposit funds into the program on those employees’ behalf; and set in place automatic annual increases to contribution rates of up to 10 percent of each participant’s wages.

Participants in the Illinois Secure Choice program are enrolled in a default target date Roth IRA with a default 5 percent payroll contribution but can choose to change their contribution level or fund option at any time or choose to opt-out of the program altogether. Accounts are owned by individual participants and are portable from job to job.

The accounts created are subject to the same limitations as any Roth IRA in terms of total annual contributions (set for $6,000 up to age 50 and $7,000 for age 50 and older for 2022) as well as maximum income ($140,000 for a single filer and $208,000 for married filing jointly). Those not eligible to contribute to a Roth IRA can instead opt for a Traditional IRA, which does not carry an income limit.

The Illinois Secure Choice Savings Program Act was created as a state-sponsored retirement savings program to boost access for private-sector employees. Secure Choice is also available to individuals who choose to sign up separately from an employer. It is funded entirely by workers’ savings, and the state says it is making it easier for employers to ensure that their employees are saving for retirement.

Illinois Treasurer Michael Frerichs has said, “We have an obligation to help people save their own money and make their own investment decisions to have a brighter future.” Frerichs also said that, before the mandate, an estimated half of Americans had less than $5,000 saved for retirement. 

The Secure Choice Savings Program Act [820 ILCS 80] established a retirement savings program to be administered by the Secure Choice Board with a purpose of providing retirement savings options to Illinois private-sector employees who lack access to an employer-sponsored plan.

The Illinois Secure Choice is run by a seven-person board. Frerichs serves as the board’s chair, and his office administers the Secure Choice program on behalf of this board while partnering with private-sector financial service firms for recordkeeping, custodial and investment management services. 

As of July 1, 2022, Secure Choice has over 105,500 participants who together have saved over $80 million for retirement. Nearly 6,500 employers, representing all of Illinois’ 102 counties, are registered for the program. 

For more information, visit Employer assistance is available by calling (855) 650-6913; employees can call (855) 650-6914.

More information from Toberman Wealth, LLC can be found at

This story also appeared in the October 2022 print edition of the Illinois Business Journal.

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