Illinois is rolling out a new state-sponsored savings program aimed at the more than 1.2 million Illinois workers who do not have access to a retirement plan through their employer.
It’s called the Illinois Secure Choice Savings Program and it will eventually require all companies in the state with 25 or more employees to automatically enroll them in the program if they do not already offer a qualifying retirement plan such as a 401(k).
Under Secure Choice, employees will have 5 percent of their gross wages automatically deducted and placed in an Individual Retirement Account, or IRA. Employees have the option to adjust up or down the contribution amount or to opt out of the program entirely.
As of November, all employers in the state with 500 or more employees that do not already offer a qualifying retirement plan are required to participate in the program. Employers with at least 100 employees but no more than 500 will be required to participate starting in July 2019, and employers with 25 or more by November 2019.
Employers will not be required to make any financial contribution to the program but will have to facilitate the enrollment of their employees by distributing information about the plan and setting up a payroll deduction process. Employers who fail to comply with the program may be subject to fines or penalties.
The plan will be portable, allowing workers to take their savings plan with them to a new job, and it will be overseen by a seven-member board chaired by Illinois State Treasurer Mike Frerichs.
In an interview earlier this year with the Daily Herald, Frerichs explained the rationale behind the plan.
“People will say, ‘Why is the state involved in it? Why do I care?’ Well, you may not care about that individual, but you’ll care when that individual shows up for food stamps. You’ll care if that individual goes on Medicaid sooner, because that’s going to cost you. If we don’t help them save their own money, we’re all going to contribute to their delinquency.”
Frerichs and Jean Chatzky, personal finance ambassador for AARP and finance editor for the “Today” show join Phil Ponce to discuss the program.