The November 1st deadline for companies with 25 to 99 employee was almost a year ago. Although the Illinois Secure Choice hasn’t chosen to enforce the program penalties yet, all that changes come late 2021. In a recent article by NAPA, Courtney Eccles, Director of Secure Choice, confirmed, “We had always planned to focus on encouraging compliance and giving employers a significant amount of time to begin Secure Choice or adopt their own plan—and certainly with COVID hitting this spring, we’re looking at later in 2021 to begin sending official notices.”
With this in mind, let’s review the penalties contained in Section 85 of the legislation. Here is the beginning of section 85:
“(a) An employer who fails without reasonable cause to enroll an employee in the Program within the time prescribed under Section 60 of this Act shall be subject to a penalty equal to:
(1) $250 for each employee for each calendar year or portion of a calendar year during which the employee neither was enrolled in the Program nor had elected out of participation in the Program; or
(2) for each calendar year beginning after the date a penalty has been assessed with respect to an employee, $500 for any portion of that calendar year during which such employee continues to be unenrolled without electing out of participation in the Program.
(b) After determining that an employer is subject to penalty under this Section for a calendar year, the Department shall issue a notice of proposed assessment to such employer, stating the number of employees for which the penalty is proposed under item (1) of subsection (a) of this Section and the number of employees for which the penalty is proposed under item (2) of subsection (a) of this Section for such calendar year, and the total amount of penalties proposed.
Upon the expiration of 90 days after the date on which a notice of proposed assessment was issued, the penalties specified therein shall be deemed assessed, unless the employer had filed a protest with the Department…”
$250 for each employee for the first year and $500 for each employee in year two!? Do you want to deal with the Illinois Department of Revenue? Remember, you will most likely pay more in penalties than the costs and fees associated with operating a 401(k) plan – including the administration, recordkeeping, and professional assistance.
And what happens when you ignore the penalty? “If an employer neglects or refuses to pay the entire liability shown on the notice and demand within 10 days after the notice and demand is issued, the unpaid amount of the liability shall be a lien in favor of the State of Illinois upon all property and rights to property, whether real or personal, belonging to the employer…” Yikes!
If you receive a notification you missed the deadline or can’t decide what to do, don’t ignore it. Now is the time to consult with a financial professional.
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®