The threshold for small businesses in Illinois to have to offer workers a retirement savings plan would be lowered from 25 to five if a law backed by Illinois Treasurer Michael Frerichs becomes law.
Businesses that reach the threshold must offer employees a 401 (k) retirement plan or automatically report employees to Illinois Saving a safe choice a pension savings program, which automatically directs a percentage of the salary to the pension account.
Each individual employee can be excluded from the program after automatic enrollment. Frerichs says the program itself and the proposed amendments are ways to combat the “pension crisis in Illinois and the country.”
“We offer a safe choice because the biggest indicator is whether someone is saving for retirement or not if they have the option of retirement savings in the workplace,” Frerichs said. “If they do, they’re more likely to save for retirement 15 times than someone who doesn’t. We think the answer is to give more people the opportunity to save with an automatic deduction in the workplace.”
Under current law, each employee enrolled in the program contributes 5% of their salary to a Roth IRA run by a state-selected financial planning company. Under the proposed amendment, that amount would increase annually until it reaches 10%. Employees can choose to give more.
Courtney Eccles, director of Secure Choice in the state of Illinois, told the Senate government committee, which passed the amendment Wednesday, that about 6,000 companies have been included in the program so far, with 85,000 workers saving a total of $ 57 million for retirement. Eccles said the proposed amendment would add a “significant number” of companies to the program, making tens of thousands more employees more eligible.
The deadline for fulfilling the conditions for new companies will not be before September 2022, Eccles said. Employers who do not comply with the law may face a penalty of $ 250 per employee after one calendar year of non-compliance and $ 500 per employee for each subsequent non-compliant calendar year.
The amendment passed the committee, and two votes were not cast by Republicans Craig Wilcox of McHenry and Win Stoller of Peoria.
“I may be‘ no ’on the board, but that doesn’t mean it will be transferred to a partial vote,” Wilcox said.
The National Federation of Independent Enterprises opposes the amendment. Illinois director Mark Grant said that the opposition is because the law requires small businesses.