According to the Illinois Secure Choice website "Illinois Secure Choice is a simple and convenient retirement savings program for employers who do not already offer a plan." That sounds good. What's not to like about that? This blog will take a deeper dive into the the Illinois Secure Choice (ILSC) program, uncovering the details employers and their participants might not be aware of, but want to learn more as they make the decision whether to participate or start their own retirement plan.
ILSC claims their program is easy for business owners and costs nothing. It automatically enrolls employees starting at 5% into a Roth IRA, but allows them the option to opt out. Employees can invest their savings in a limited investment lineup. Employers are responsible for submitting the contribution on the ILSC website, but only act as a facilitator, not a fiduciary. ILSC does have a helpful 12 page employer handbook to assist you in setting up and running the ongoing maintenance.
ILSC is not without shortcomings. The program doesn't offer the ability to save in a traditional IRA (because the state of Illinois wants to tax money today) and there is a limited investment menu for your employees to save. Employees, by the way, include anyone who works (full or part time) more than 60 days, including interns, temporary employees, and seasonal workers. The state of Illinois provides little resources should you run into a situation off the beaten path and don't know where to turn or what to do next. For example, how do you handle a missed payroll deduction?. The FAQs only mention, "The State may impose penalties for deduction violations."
Let's be honest, ILSC is a headache waiting to happen. Employers are now solely responsible for a multitude of items. The pitfalls exist in every aspect of the program - properly enrolling an employee, properly and timely submitting the contributions, taking questions from employees about investments, etc. ILSC can claim their isn't an outright cost to employers, but what about the time wasted on all this? Business owners don't go into business to operate a retirement plan (run by the state of Illinois no less) for their employees.
And what happens if you decided to just put this off past the November 2019 deadline? The state of Illinois slaps you with a penalty of $250 per employee in 2019 and $500 per in subsequent years!
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®