Frerichs
A proposal to extend the coverage of the Illinois Secure Choice pension savings program to companies with at least five employees is being considered by the governor after receiving bipartisan support in the General Assembly.
Lowering the existing threshold to five employees from 25, under the Optional Savings Program Act, was a top priority in this year’s Illinois Treasurer Legislative Program, Michael Frerichs.
“This common sense change to the existing law helps workers save their own retirement money, while reducing future pressures on state safety net programs,” Frerichs said. “Everyone should have the right to withdraw with dignity, and with a safe choice we make that possible.”
On April 14, the House adopted HB 117 by 106-02. The Senate passed the law on May 28 from 42 to 15.
A safe choice was launched in 2018 to address the pension savings crisis. The program requires companies to either provide a private sector retirement plan for their workers or enroll in Secure Choice, a government program that provides workers with their own Roth-IRA. Participants are automatically enrolled in target date funds based on age with a set contribution rate of five percent. Participants may at any time change their contribution level or funding option or cancel the program altogether.
The safe selection is overseen by a seven-member board, and Treasurer Frerichs serves as chairman, and is governed by Ascensus, the largest independent scorer and savings intermediary in the United States. Accounts are transferable, which means they can travel with workers if they change jobs. Employers do not pay anything for participation and are prohibited from contributing bills. Most importantly, the investments are kept in the foundation separately and separately from the state government and cannot be swept away.
More than 88,000 workers in all 102 counties from more than 6,000 companies saved over $ 61 million in Safe Choice.
“AARP Illinois has worked hard to support Safe Choice, because we know that helping people over the age of 50 to improve their quality of life as they get older doesn’t just mean helping people who are close or currently retired – it means paying attention to those stages their careers that will retire in the future, ”said CEO Bob Gallo. “On behalf of our 1.7 million members, we welcome Illinois lawmakers who have taken steps today to make sure every worker has the opportunity to set aside the money needed to take control of their future.”
The urgent need for employment-based pension savings is clear:
- 15x -Workers are 15 times more likely to save if they have access to a plan to reduce wages at work.
- 40 percent – More than 40 percent of all companies do not offer a retirement plan.
- 90 percent – One-third of Illinois retirees rely on Social Security for 90 percent of their retirement income.
- $ 19,000 – The average annual Social Security benefit in Illinois is $ 19,000.
- $ 5,000 – The average pension savings for all able-bodied households is $ 5,000.
- 57 million – Nearly 57 million Americans do not have access to a retirement savings plan at work.
Without adequate savings, too many workers risk falling into poverty and relying on social protection programs. Ensuring that workers have an easy and simple way to save for retirement increases the likelihood that they can build a nest to ensure self-sufficiency and peace in their golden years.
The bill introduces additional changes, including allowing for an automatic increase in contributions as part of a given savings option (automatic escalation) and easing enforcement provisions already prescribed by the statute, providing additional time for compliance and an opportunity for employers to waive penalties.
