Now, Illinois has signed into law a new plan that's aimed at addressing this issue and could provide a blueprint for other states and even at the federal level. Called Secure Choice, the plan will start enrolling state residents with jobs who don't already have a retirement plan in 2017.
illinois secure choice savings program
A bill passed by the General Assembly and signed into law this week creates the Illinois Secure Choice Savings Program, which mandates that private sector employers in business for at least two years and employing 25 or more workers either offer their own retirement savings plan or provide payroll deduction for workers who want to use the newly created state plan.
The program will be created under a law signed by Gov. Pat Quinn on Sunday. Participation will be voluntary, but workers who don’t want to save will need to opt out manually. (They will also be allowed to save more than 3 percent if they wish.) An estimate produced by the plan’s backers found that up to two million of the state’s residents may end up with the accounts.
In what may emerge as a standard for all states, Illinois is introducing a tax-advantaged retirement savings plan for most residents who do not have such a plan at work. The program echoes one that President Obama has endorsed at the federal level, and it boosts momentum that has been building for several years at the state level.
The middle class is in terrible shape. Wages are stagnant, the middle class’s share of the nation’s wealth has been declining for decades, and ordinary Americans feel like they’re just exiting a recession that ended years ago. But could 2015 be the year that marks a turning point for rebuilding middle-class wealth? Two new retirement savings initiatives, myRA and Illinois’s Secure Choice, offer hope that financial security and wealth building aren’t relics of the past for the middle class.
This is a victory for all Illinoisans. First, millions previously without access to such accounts now can utilize a payroll deduction to save for retirement. Second, on the cost front, most of the costs of administering the accounts will be funded by the pooled assets of the participants, and all Illinoisans will benefit when more of its citizens are able to fund their own retirements.
“For many people across Illinois, retirement planning is often a matter of too little, too late,” Governor Quinn said. “Without an adequate retirement savings plan, many people are forced to spend their later years scraping to get by with just Social Security. This legislation protects millions of private sector employees in Illinois who work hard but do not have the option of a retirement plan through their employer.”
Daniel Biss—the Illinois state rep senatorand MIT Ph.D.—was the lead sponsor of the legislation, and Governor Quinn just signed it into law this Sunday, making Illinois the first state in the nation to implement an automatic, opt-out retirement-savings plan. And it’s an idea with something of a Chicago pedigree, as the publication of Cass Sunstein and Richard Thaler’s influential Nudge gave opt-out programs a boost at the political level.
The law, which passed the Illinois General Assembly during the 2014 veto session, will automatically enroll workers without access to an employment-based retirement plan into the program. While workers can opt out, participants will build savings in a Roth Individual Retirement Account (IRA) through payroll deductions.
Yet when Biss' bill came to a vote in the House and Senate last week, it received only one Republican vote. Only ... one. "I'm proud of my vote," state Rep. David McSweeney, R-Barrington Hills, tells us. "I came in skeptical, and (Biss) spent a lot of time answering my questions and making changes, and I think this could save state government a lot of money over the next 50 years."