All Illinois for-profit and non-profit employers with at least five employees will soon be required to comply with the Illinois Secure Choice Savings Program Act (“Secure Choice” or “Program”) or offer employees an employer-sponsored retirement plan due to Program amendments under HB 117. The amendments take effect January 1, 2022.
Secure Choice requires employers to automatically withhold five percent of an employee’s compensation (up to the annual maximum allowed for IRA contributions by the IRS), unless the employee elects a different amount or opts out of the Program. Employers are also responsible for remitting those contributions to the state. However, employees under age 18 may not be automatically enrolled by an employer.
Under the original Program, employers who are subject to the Program are those that have:
- A least 25 employees as reported to the Illinois Department of Employment Security (IDES) for unemployment insurance payments;
- Been operating in Illinois for at least two years; and
- Do not offer a qualified retirement plan to any Illinois employees, such as a 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b).
Medium and large sized employers were already required to register for the Program by November 1, 2018 (for employers with 500 or more employees) and November 1, 2019 (for employers with 25 to 99 employees).
The amendments make the following changes to the the Program:
- The 25-employee threshold is reduced to five (5) employees. The Program will now apply to employers with at least five (5) employees in the state during every quarter of the previous calendar year. The employer determines the total employee count using the annual average from the employer-reported quarterly data.
- Secure Choice now includes annual, automatic increases to the contribution rates up to a maximum of 10% of an enrollee’s wages. The Illinois Department of Revenue will establish a schedule for the automatic increase.
- The amendments clarify that the second year of non-compliance need not be consecutive for applying the $500 non-compliance penalty.
- Employers now have 120 days (instead of 90 days) after issuance of a notice of proposed penalty assessment for non-compliance to file a protest with the department or come into full compliance.
- The amendments permit notices to be provided electronically instead of only via first class mail.
The Program will notify employers before their scheduled start time to allow them time to register. Employers of certain sizes must begin registering for the Program on the dates noted below:
- Beginning September 1, 2022, registration begins for employers with 16 to 24 employees; and
- Beginning September 1, 2023, registration begins for employers with five to 15 employees.
The Illinois Secure Choice website provides additional information and FAQs.