Illinois made a big splash with the Illinois Secure Choice program. The state is concerned with the lack of retirement savings. According to Investopedia, “An October 2017 Government Accountability Office (GAO) analysis found that the median retirement savings for Americans between age 55 and 64 was $107,000. The GAO notes this sum would only translate into a $310 monthly payment if it was invested in an inflation-protected annuity.”
While most people agree there is a savings problem in America, there is disagreement how to solve it. State-forced savings is not the solution. According to the American Retirement Association, 201,415 employers in the state of Illinois do not provide a retirement plan. This means 1-1.2 million employees do not have the opportunity to save for retirement via a plan through work. While this is a huge concern, the Illinois Secure Choice program so far isn’t working to fill the gap.
Since Illinois Secure Choice began in late 2018 when employers with 500+ employees were forced to begin participating in the program, 9,000 private-sector employees from 100 different employers have collectively set aside one million dollar as of March 2019, as reported by NPR. This means less than 18% of participants elected to save. The average account balance is around $112, which means the average weekly savings is about $10 per employee.
The state of Illinois is touting this as a great success. They are happy to collect their .05% fee, or $500 for every million dollars, of program assets. But is this really success? Is all the work, confusion, time, energy, and effort worth it? Is this the best solution if you really want employees to save? What about your personal savings?
To employers and human resource professionals this is a nuisance you don’t want, didn’t ask for, and want to get off your plate. If you have any questions, need additional information, or would like to talk about other retirement plan options, please do not hesitate to contact Associated Pension Services, Inc. We have been involved in the retirement plan administration business for over 30 years, helping small business owners and HR managers like yourself navigate, establish, and implement retirement solutions. You don't need to go at this alone.
Frederic (Eric) Hoffman, IV, AIF®, CPFA, APR, RICP®