More workers in Illinois whose employers don’t offer retirement savings plans are finding 5 percent of their pay automatically taken out of their checks and put into a retirement plan.
Illinois Treasurer Michael Frerichs said the state’s Secure Choice Savings program will pay dividends in the future.
The Illinois Secure Choice Savings program began in late 2018 with companies employing more than 500 employees that didn't offer a savings plan. Employers take 5 percent out of their employees' checks to put into individual retirement accounts. Employers don’t have to match that investment and employees can opt-out.
Employers with 100 to 499 employees were required to register for the state program beginning in July 2019. In November 2019, the third and final phase of the program started for employers with 25 or more employees doing business in Illinois for two or more years.
Frerichs said other than mandating the program on employers, the state doesn’t handle the money.
“So money comes out of people’s paycheck and it goes into their individual Roth IRA,” Frerichs said. “They get to determine how they make the investments and the program is managed by the private sector firm Ascensus.”
Some employees across the state may not have realized they were in the program. They have to opt-out through their employer.
Small business advocates have said the program could be a burden for small businesses to facilitate and could make for some uncomfortable conversations between employers and employees.
Frerichs said that helping facilitate retirement savings for more people was the right thing to do.
“We think people need to be saving money for their retirement,” Frerichs said. “It’s clear we have a retirement crisis here in this state and in this country, so it’s in all of our interest to make sure that these people are preparing for their golden years because if they don’t save they’re going to use government safety net programs in the future, for health care, for housing, for food assistance.”
Employers don’t have to match the investment, but they do have to automatically deduct 5 percent or face a $250 fine per employee.