By Epstein Becker Green
On January 4, 2015, the governor of Illinois signed into law the Illinois Secure Choice Savings Program Act (S.B. 2758). This law—first of its kind in the nation—requires certain employers to provide an automatic payroll deduction for savings in a Roth IRA for employees who are over age 18 and who do not opt out. Employers who are subject to this mandate are those who have 25 or more employees in Illinois, have been in business for at least two years, and have not offered their employees tax-favored retirement benefits in the preceding two years. Employers not otherwise subject to the Act may participate in the Program on an elective basis. The Program will not be activated before 2017, and affected employers must establish a payroll deposit arrangement “at most nine months” after the Program opens for enrollment.
Several interest groups promoted this legislation, and several opposed this ambitious law.
Scope of Program
The Secure Choice Savings Program will require affected employers to automatically enroll eligible employees who do not opt out and to facilitate payroll deductions for those employees. The statute provides that employers will not be treated as fiduciaries “over the Program” or liable for Program investments, design, or benefits. No employer contributions are required.
Open enrollment will occur at least once a year. Affected employers will forward the payroll deductions to a system administered by a seven-member state board that will supervise the investment of the assets, engage investment managers, and perform similar supervisory functions. Employers’ activities will also include distributing materials provided by the state board. Penalties for an employer’s violation will be $250 per employee per year, with the amount increasing to $500 for violations with respect to employees who continue to be treated as unenrolled in years after the initial assessment.
Enrollees may contribute up to the IRA maximum, with a default level of 3% of wages for those who do not elect a different percentage or amount. Enrollees will have the investment options provided by the state board.