Understanding Illinois Secure Choice: A Guide for Financial Advisors

As an advisor, it's important to understand the retirement savings options available to your clients, especially those states with retirement state mandates, like Illinois. The Illinois Secure Choice program is a state-mandated initiative designed to ensure that small employers offer their employees a retirement savings plan. This effort aims to protect citizens from reaching retirement age without adequate savings to get them through the rest of their lives. 

Is Illinois Secure Choice legitimate?

Illinois Secure Choice is a retirement savings program established by the Illinois State Legislature and overseen by the Illinois Secure Choice Savings Board. Its primary goal is to increase the number of workers with access to employer-sponsored retirement plans and reduce the future reliance on taxpayer-funded public assistance. This program specifically targets employees of smaller businesses who typically lack access to retirement savings plans. 

How does Illinois Secure Choice work? 

Illinois Secure Choice operates as a payroll-deducted Roth IRA account. Employees contribute on an after-tax basis through payroll deductions. They are automatically enrolled at a 5 percent contribution rate, with the option to opt in or out at any time. The account remains with the employee, even if they change jobs. Higher-income employees may not be eligible to contribute due to federal income limits but can opt for traditional IRA contributions instead. 

For clients, the program is designed to be cost-effective and straightforward, with no fees for facilitating the program. Employers cannot make matching contributions and have limited responsibilities in the plan's day-to-day operations. 

Complying with Illinois Secure Choice mandates 

The Illinois Secure Choice program aims to close the retirement savings gap among small business employees. Clients who meet the following criteria must register for and participate in the program: 

• Have five or more employees 
• Have been in operation for at least two years 
• Do not already offer an employer-sponsored retirement plan 

Businesses that meet these criteria must adhere to the following registration deadlines to avoid penalties: 

• 25+ Employees 
  • Deadline passed* 
• 16-24 Employees 
  • Deadline passed* 
• 5-15 Employees 
  • November 1, 2024 

Failure to comply with these deadlines can result in fines of $250 per employee for the first year of noncompliance and $500 per employee for each subsequent year. 

*Take action now to avoid any financial penalties 

Illinois Secure Choice employer responsibilities 

While Illinois Secure Choice is designed to be relatively hands-off for clients, there are multiple steps the employer will have to take to ensure they are compliant with the regulations set by the state-mandated program. 

• Register for Secure Choice: Employers will receive an email with a customized access code to start the registration process. They must provide company information and details for eligible employees. 
• Add Delegates or Payroll Representatives: To assist with ongoing administrative tasks. 
• Prepare Employee Contribution Information: Employees have 30 days to make changes to their account before contributions begin. 
• Perform Regular Account Maintenance: Employers must process payroll contributions, update contribution rates, add new employees, and mark employees as inactive when necessary. 

Employers are not responsible for managing investment selections, processing distributions, or answering investment-related questions. 

Alternatives to Illinois Secure Choice 

Illinois Secure Choice, as a state-sponsored auto-IRA program, has limitations compared to other employer-sponsored retirement plans. It offers no tax benefits for business owners, has lower contribution limits, and requires ongoing manual maintenance. Business owners seeking more flexibility may consider other qualified plans like 401(k), 403(a), 403(b), SEP or SIMPLE IRA, 457(b), or Taft-Harley plans. These options can offer higher contribution limits, tax benefits, and more plan customization. 

At Ascensus, we are committed to helping everyone achieve a financially secure future. We partner with state governments to create user-friendly platforms for state-facilitated retirement savings programs. Ascensus works closely with states to: 

• Simplify plan and account management with custom-built administration websites 
• Provide consistent and clear education about the program 
• Offer dedicated service teams to answer questions from employers and employees 

Learn about Illinois Secure Choice
For more information about Illinois Secure Choice, visit the Secure Choice website. If you’d rather speak to a representative from Secure Choice by phone, you can contact the program’s Client Services Team at 855-650-6914.