At Woodstock Institute’s 2015 Community Investment Awards, we will present Heartland Alliance with a Community Investment Award for their work to advance retirement security. Heartland Alliance is one of the leading anti-poverty organizations, with 125 years of service. Heartland Alliance works with both policymakers and communities to ensure action is taken to curb poverty.
“The plan, called Secure Choice, aims at a gap in America’s retirement saving system: Employer-based savings plans are supposed to be an important source of Americans’ retirement income, but large employers are far more likely to offer such plans than small ones.
Illinois is piloting a “mostly mandatory” Individual Retirement Account (IRA) savings program for private sector workers. Though not a DC in that it doesn’t require employer payments, it requires businesses with 25 or more employees without a retirement program to enroll their workers into an IRA that automatically deducts 3 percent from each paycheck. Workers may increase the contribution or opt out entirely.
Earlier this year, then-Governor Pat Quinn signed the Illinois Secure Choice Savings Program Act. Starting in 2017, among employers that do not offer a qualified retirement plan, companies with more than 25 workers will need to auto enroll their employees in a Roth IRA account. Employees will have the option to vary their 3% default contribution percentage or cancel their auto enrollment in the program, which does not include an employer contribution, but experience has shown that auto enrollment significantly increases participation in retirement accounts.
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.
But Illinois just became the first U.S. state to adopt a promising new approach to a big problem in the nation's retirement saving system: the lack of workplace saving options for low-income workers.
Starting in 2017, companies that do not offer retirement plans will be required to automatically sign up their workers for a state-sponsored Roth IRA account, funded by a 3 percent (or higher) after-tax deduction from their paychecks, with the growth accruing tax-free.
Starting in 2017, companies that do not offer retirement plans will be required to automatically sign up their workers for a state-sponsored Roth IRA account, funded by a 3 percent (or higher) after-tax deduction from their paychecks, with the growth accruing tax-free.
The requirement applies to employers with 25 or more workers who have been in business at least two years, and workers can opt out if they choose.
Illinois will not be contributing to the new Illinois Secure Choice Savings Program (ISCSP) accounts, and investment management will be farmed to an outside firm.
Beginning in 2017, Illinois residents who don't have a retirement plan at work will be automatically enrolled in individual retirement accounts and have 3 percent of their paychecks funneled into them. Employers with at least 25 employees must offer the Secure Choice program, and workers must opt out if they don't want to participate.
Administrative costs will be borne by savers, who will be charged up to 0.75 percent of their balances.
The law creates the Illinois Secure Choice Savings Program, which automatically gives each Illinois worker a retirement account. Three percent of an employee’s payroll will be put into the account unless he or she manually changes the amount. This gives workers who lack an employer-sponsored plan a way to save money while still allowing them to opt out if they choose.
Workers at businesses in operation for at least two years with 25 or more employees will be required to have access to an individual retirement savings account through their employer by June of 2017 under the Secure Choice Savings Program, sponsored by State Sen. Daniel Biss (D-Evanston) and Illinois House Majority Leader Barbara Flynn Currie (D-Chicago).
