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Illinois Secure Choice: What You Need To Know

Did you recently receive a notice from the state of Illinois regarding registering your company with Illinois Secure Choice? Are you looking to learn more about the program?  Associated Pension Services, Inc. is the professional assistance you need. We're here to help answer all of your questions. Give us a call today to learn more about alternatives to the Illinois Secure Choice program by setting up a retirement plan for your company.  

What is Illinois Secure Choice (ILSC)?

  • State-run mandatory auto-deferral IRA retirement savings program
    • 820 ILCS 80/ was signed into law in 2015 by Governor Pat Quinn
    • Program was implemented on 11/1/2018 and continues through 11/1/2023
    • Affects Illinois-based companies with 5+ employees (includes full or part time)
    • Operating for at least two years
    • No current retirement plan in place - Includes SEP IRAs, SIMPLE IRAs, and 401(k) Plans
  • Two Options
    1. Illinois Secure Choice OR
    2. Start their own retirement plan

How It Works (Or Is Supposed To Work)

  • Every employer will receive two notices
    • Early Notice: 120 days prior to registration deadline
    • Official Notice: 30 days prior to registration deadline
    • Notices sent by USPS or via email if an email address is on file
  • Employers required to register on the ILSC website:
  • DEADLINES to Register:
    • Phase 1: 500+ Employees, registration deadline was 11/1/2018
    • Phase 2: 100 to 499 Employees, registration deadline was 7/1/2019
    • Phase 3: 25 to 99 Employees, registration deadline was 11/1/2019
    • Phase 4: 16 to 24 Employees, registration deadline was 11/1/2022
    • Phase 5: 5 to 15 Employees, registration deadline is 11/1/2023

Program Details

  • Employees are eligible if they are 18 years old or older and work at least one hour
  • Employees become auto-enrolled after 60 days on the job
  • Both Roth IRA and Traditional IRA (for participants who aren’t eligible to contribute to a Roth IRA) options are available
  • Automatic deferral set at 5% of pay
  • Employees can increase or decrease their deferrals or opt out of the program at any time

Investment Options

InvestmentApproximate Cost
State Street Institutional U.S. Government Money Market Fund (SAHXX).15%
BlackRock LifePath Index Target Date Retirement Funds.00% - .31%
State Street Institutional Liquid Reserves (SSHXX).15%
Schwab U.S. Aggregate Bond Index Fund™ (SWAGX).04%
Schwab® S&P 500 Index Fund (SWPPX).02%

Additional Costs

  • State of Illinois receives .05%
  • Ascensus (recordkeeper) receives .55%

Employer Responsibilities

Congratulations! Your duties now include:

  • Registration of new hires on the ILSC website with in 30 days and start automatic deferrals within 60 days
  • Track eligibility
  • Submit ongoing payroll contributions
  • Monitor and update contribution rates
  • Process opt-outs and other paperwork
    • Opt Out Form, Beneficiary Designation Form, Beneficiary Designation Addendum Form, Account Maintenance Form, Distribution Request Form, Excess Removal Worksheet, Recharacterization Election Form, Inherited IRA Beneficiary Distribution Election Form
  • Establish an annual open-enrollment period
  • Answer employee questions and concerns
  • Retain records for 3 years

Caution: Potential Employer Hazards

  • Notices potentially sent by email
  • Out-of-state residents who work in Illinois
  • Summer interns, seasonal workers, temporary workers, H-2A visa holders, family members: ALL eligible
  • Very little assistance for both you and your employees
  • FAQs state, “The program has minimal staff.”
    • The call center has only 20-25 reps total
  • Unclear penalties for noncompliance and failure to register an employee properly
    • Penalties are not listed on the ILCS website. They are found in the legislation in section 85 of 95.
    • Employers who ignore the mandate and miss the deadlines will be penalized $250 per employee the first year, and $500 per employee in subsequent years
    • Example: 16 employee company ignoring the mandate WILL be fined $4,000 on 11/2/2022, then $8,000 for all subsequent years

Caution: Potential Employee Pitfalls

  • Fail to opt out in time and the rent money is now sitting in their ILSC account. What now?
  • Paperwork, paperwork, paperwork
  • Employee monitoring of BOTH annual Roth IRA contribution limits and wage restrictions. Could they blame the employer for lack of guidance?
  • Excess IRA contributions for those employees already making Roth IRA contributions? Corrective distribution needed?
  • Looking for investment help? ILCS FAQs state “talk to a financial advisor about investment options.” 

What’s the Answer?

  • Run away and don’t look back. You are basically dealing with the DMV. This is a disaster you didn't create or ask for, but you will spend time, money, and energy trying to deal with the paperwork, hassle, and headache. Make no mistake; this is not free, convenient, or automated.
  • You need to partner with a professional in the retirement business. You became a business owner to run a business, not run a retirement plan.
  • Open your own company retirement plan
    • SIMPLE IRA Plan or SEP IRA Plan- Potentially an option, but not as simple to set up and operate as you might think.
    • 401(k) Profit Sharing Plan
  • Get a solution that has been tested, already in-place, and built to deal with the brutal reality. You will fail and penalties are far more expensive then it is to set up a retirement plan.

401(k) Profit Sharing Plan and Trust 

  • More flexibility and control over plan design than ILSC
  • Access to a financial professional
  • Limit eligibility (age 21 & One Year of Service)
  • Greater participant support and education
  • Limit participant transactions – withdrawals, distributions, loans, hardships
  • Possible integration with payroll provider
  • Limit entry dates
  • Small upfront start up cost vs. potential for much larger fines and penalties
  • Higher deferral and catch-ups
  • IRS tax credits
  • More expansive investment lineup
  • Avoid the ILSC


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®
(847) 400-7882

All information can be found at: