The hot topic of employer-sponsored retirement plans has been in the news again lately, and Illinois is among multiple states that have launched a state-sponsored retirement savings plan. Illinois’ Secure Choice Retirement Plan is to be a solution for employees who don't have access to a traditional retirement plan through their employer. However, the plan also has implications for businesses in the state.
The Secure Choice Retirement Plan has mandated participation if an employer does not offer a retirement savings plan. However, businesses with five or fewer employees are exempt, but must register that they are exempt through the plan’s website.
Businesses with more than five employees must automatically enroll their employees to avoid fines or start a retirement savings plan at their business. Here are some critical dates business owners need to be aware of:
- 25+ employees - the deadline has passed.
- 15-25 employees - the deadline has passed.
- 5-15 employees - November 1st, 2023, registration is open.
The Secure Choice plan allows employees to save a portion of their paycheck into the Secure Choice Retirement Plan after being enrolled by their employers. Contributions are made directly from employee wages, with no up-front costs to the employer. Here is additional key information to know:
- The State of Illinois manages the program.
- The employer must offer enrollment to all employees.
- The employer must inform employees of the plan.
- The employer is responsible for withholding and transferring contributions from employee paychecks to the Secure Choice Plan.
The main concern is that the Secure Choice Retirement Plan will require extra paperwork and pose an administrative burden, which can be difficult for smaller businesses. Business owners should also be aware of the potential liability regarding reporting and other administrative duties. It's important to remember that the Employee Retirement Income Security Act of 1974 (ERISA) protects both employers and employees from certain liabilities. However, business owners must still be diligent and follow the Secure Choice Retirement Plan's guidelines.
Ultimately, the Illinois Secure Choice Retirement Plan is an option for business owners who don’t want to manage a 401(k) retirement plan. With the state plan, they don’t have to worry about the up-front costs of administering a 401(k) plan. As a business owner, it’s crucial to do thorough research and familiarize yourself with this program to ensure you have a solid understanding of how it will affect you and your business.
As a business owner, offering an attractive employee retirement savings plan can help draw in and retain the talent essential to your business’s success. A well-designed 401(k) plan may help demonstrate to employees and job candidates that you are concerned about their financial wellness in retirement.
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by Fresh Finance.
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