Illinois Businesses Need to Act Now – The Illinois Secure Choice Program Has Arrived
The Illinois Secure Choice program is a mandatory state run retirement plan. It will apply to your company if you meet the state mandated criteria (defined below) and if you do not currently offer a retirement plan to your employees. However, even if your company does offer a retirement plan (such as a 401-k or profit sharing plan) there is action you are required to take.
The required registration date for employers with 100 – 499 employees is July 1, 2019. Illinois employers in this group will first be contacted by Secure Choice four months prior to this date, which means these businesses will or should be contacted by the end of February. This initial contact will be followed by an invitation to register one month before the required registration date of July 1st. For businesses with 25-99 employees the registration date is November 1, 2019.
These letters and invitations will be sent to all Illinois businesses with the applicable number of employees. If your business already offers a retirement plan, you will need to go to the Secure Choice website and claim an exemption. Be sure to keep all correspondence from Secure Choice, as the letter or e-mail you receive will contain an access code which you will need to either register for the program or claim an exemption.
The Illinois Secure Choice Savings Program Act (Act) requires private sector employers who meet all of the following criteria to offer retirement benefits with a state-run payroll-deduction Roth IRA:
- Illinois employer with 25 or more employees
- Business has been in operation for two or more years, and
- Employer does not currently offer an employer-sponsored retirement plan.
Employer obligations include:
- Once you have reached the rollout date for employers of your size, inform employees of the program and automatically enroll them into the program.
- Hold an annual open enrollment period for any employees who opted out of the initial enrollment.
- Administer payroll deductions and deposits into program accounts.
The Act does not provide for employer contributions. Employees will be automatically enrolled with a deferral of 5% of pay, unless they opt out or choose a different rate of savings. This program is applicable to both full-time and part-time employees, as well as business owners who are 18 or older. There will be a menu of investment options for the employee to choose from, although there is a default investment option if none is selected. Employees can also adjust their contribution or opt out at any time.
Annual contributions cannot exceed Federal IRA Maximums (for 2019 this limit is $6,000 for workers under age 50 and $7,000 for those 50 or older). In addition, if the employee exceeds the Federal Roth IRA income limitations, they will need to opt out of participation.
There is an initial penalty of $250 per employee per year (increasing to $500 per employee per year) for noncompliance with this program.
The experts at MichaelSilver are ready to answer any questions and discuss how these new retirement plans, or alternative retirement plans can effect and perhaps enhance your business. Please contact us at 847.982.0333 to discuss your specific needs.
Laurie Kaplan, CPA – Partner, has served as a trusted advisor to clients for over 25 years, managing and addressing tax and accounting issues within a variety of industries. Laurie’s consultative approach allows her to partner with clients to address their personal and business needs. Laurie serves as the firm’s key employee benefit plan specialist, consulting and advising clients on plan selection, design, set-up, and administration. She also develops innovative solutions for her clients based on her expertise in like-kind exchanges, small business start-ups and estate and gift taxation.