The final Illinois Secure Choice deadline of November 1 is less than four months away. Small businesses that have 5 or more employees will be required to offer a retirement savings plan for their eligible employees. If you are an employer in the State of Illinois and have five or more employees but do not offer a retirement savings option to your employees, the following article is a “must read.
As the landscape of retirement savings continues to evolve, employers in Illinois are facing a major shift with the implementation of the Secure Choice Program. This mandatory retirement plan, aimed at enhancing financial security for workers, has significant implications for businesses in the state. In this article, we will explore how the Illinois mandatory retirement plan impacts employers. We will also examine the requirements, benefits, and challenges that small business owners may encounter in complying with the program.
State law now requires every employer with five or more Illinois employees to offer their own retirement program or facilitate Illinois Secure Choice.
Illinois Secure Choice is a retirement savings program that is offered by the State of Illinois to help employers comply with the state-wide retirement mandate. Employers with five or more employees must either enroll in Secure Choice and provide employee information to Secure Choice or sponsor a qualified plan through the private market.
Initially, the mandate applied only to businesses with 25 or more employees, but a recent amendment expanded it to those with five or more employees who have been in business for two or more years. Employers need to understand how Secure Choice works and compares to other plans in the private market so they can make an informed decision about what’s best for their organization.
1. Compliance Requirements for Employers
The Secure Choice Program applies to employers with 5 or more employees who do not offer an employer-sponsored retirement plan. Employers can select a qualified retirement plan or participate in the state-sponsored program.
Automatic Employee Enrollment: One of the primary responsibilities for employers is ensuring that eligible employees are automatically enrolled in the Secure Choice Program. This requires coordination with the state-administered program and chosen financial services providers to enable automatic payroll deductions.
Timely Payroll Deductions: Employers must promptly deduct the designated portion of an employee's salary and forward it to the selected financial services provider for investment in the individual retirement accounts (IRAs). Accurate and timely payroll deductions are essential to maintain compliance.
Employee Communication and Education: Employers play a crucial role in informing their employees about the program, explaining the benefits of participation, and ensuring that those who wish to opt out do so in a timely manner.
2. Benefits for Employers
While the implementation of the Secure Choice Program brings added responsibilities, employers can also reap benefits from participating in the mandatory retirement plan.
Tax Incentives: Employers who comply with the program requirements become eligible for tax incentives, which can help offset administrative expenses related to the Secure Choice Program.
Financial Wellness: By encouraging employees to save for retirement, employers contribute to the financial stability and peace of mind of their workforce, leading to potentially higher employee morale and productivity and improved talent retention.
3. Challenges and Considerations for Employers
While the Secure Choice Program presents some advantages, employers may face certain challenges during its implementation.
Administrative Burden: Compliance with the program may entail additional administrative tasks, such as managing employee enrollments, coordinating payroll deductions, and ensuring accurate reporting.
Employee Engagement: Encouraging employee participation and overcoming potential resistance to automatic enrollment may require thoughtful communication and education initiatives. Employers should strategize to maximize employee engagement with the program.
Fiduciary Responsibility: While employers are not responsible for managing the investment options, they do bear a fiduciary responsibility to select and monitor the financial services providers that manage the IRAs. This necessitates due diligence in choosing reputable and reliable providers.
The November 1 deadline brings opportunities and challenges for employers in the state. Compliance requires effort and attention to detail. By navigating the implementation process with diligence and foresight, employers can reduce the cost of implementation while providing a valuable benefit to their employees.
For assistance in determining which plan is the best fit for your business, call our office to schedule an appointment.