Quick Summary
- Illinois Secure Choice, now called My Illinois Savings, is Illinois’ state-facilitated payroll deduction IRA program.
- The mandate generally covers private-sector employers that had at least five Illinois employees in every quarter of the previous calendar year, have operated for at least two years, and do not offer or contribute to a qualified retirement plan.
- Covered employers must register or certify an exemption by the deadline stated in their program notice.
- State law provides penalties of $250 per employee for the first calendar year of noncompliance and $500 per employee for each subsequent noncompliant year.
- A SIMPLE IRA plan can qualify for an exemption. A standalone payroll deduction IRA is not currently treated as a qualified retirement plan for the Illinois exemption.
Introduction
Illinois Secure Choice, now called My Illinois Savings, requires covered Illinois employers that do not offer a qualified retirement plan to facilitate the state retirement savings program. Employers that offer or contribute to a qualified retirement plan can certify an exemption.
Covered employers have two options: register for My Illinois Savings and facilitate employee payroll deductions, or offer a qualified retirement plan. The differences include employer contributions, plan administration, and the savings and investment features available to employees.
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What Illinois Secure Choice Is
Illinois Secure Choice, now called My Illinois Savings, is Illinois’ state-facilitated automatic-enrollment payroll deduction IRA program.
Covered employers that do not offer or contribute to a qualified retirement plan can use the state program to meet Illinois’ retirement savings requirement without establishing an employer-sponsored plan.
Eligible employees contribute to individual retirement accounts through payroll deductions. Employees can opt out or change their contribution elections under the program’s rules.
Employers register, provide employee information, and remit payroll deductions. They do not make required employer contributions or select investments for employees.
The state program is one compliance option. An employer may instead offer or contribute to a retirement plan that Illinois recognizes as qualified and certify an exemption from the state program. Employer-sponsored plans may differ in their contribution structures, administrative requirements, and available features.
Which Employers Have to Comply With Illinois Secure Choice?
A private-sector business is generally required to participate in Illinois Secure Choice when all three conditions apply:
- It employed five or more employees in Illinois during every quarter of the previous calendar year.
- It has been operating for at least two years.
- It does not offer or contribute to a qualified retirement plan.
A business that offers or contributes to a qualified retirement plan can certify an exemption from the state program. Businesses that do not meet the employee-count or operating-history requirements generally are not required to participate.
Illinois Secure Choice Deadlines and Penalties
Employers that receive a program notice must register for the state program or certify an exemption by the deadline stated in the notice. Deadlines are employer-specific, so there is no single current registration date that applies to every business.
Penalties may apply when a covered employer does not enroll eligible employees or remit payroll deductions as required. State law provides a penalty of $250 for each affected employee for the first calendar year of noncompliance and $500 for each subsequent noncompliant calendar year. These years do not need to be consecutive.
After receiving a notice of proposed assessment, an employer has 120 days to file a protest or come into compliance before the proposed assessment becomes final.
An employer subject to the mandate has two compliance options:
- Register for the state program and facilitate employee payroll deductions.
- Offer or contribute to a qualified retirement plan and certify an exemption.
An employer that already offers or contributes to a qualified retirement plan must complete the state’s exemption process. The state program determines whether the exemption requirements are met.
Your Two Options
Employers subject to the Illinois retirement mandate generally have two compliance options.
Option 1: Register for the State Program
An employer can register for Illinois Secure Choice and facilitate employee payroll deductions. The employer provides employee information and remits contributions, while the state program administers the individual retirement accounts and available investment options. Employer contributions are not required.
Employees control whether they participate and may opt out or change their contribution elections under the program’s rules. Employers do not select investments for employees.
Option 2: Sponsor a Qualified Retirement Plan
An employer can offer or contribute to a qualified retirement plan and certify an exemption from Illinois Secure Choice. A SIMPLE IRA plan is one arrangement Illinois recognizes for this purpose. Under SIMPLE IRA rules, employers make required matching or nonelective contributions.
Employer-sponsored plans may have different contribution requirements, administrative responsibilities, and participant features than the state program. The state program determines whether an employer or plan meets the exemption requirements.
What Counts as a Qualified Retirement Plan?
An employer that offers or contributes to a retirement plan recognized as qualified under Illinois Secure Choice can certify an exemption instead of participating in the state program.
A SIMPLE IRA plan is a qualified plan recognized by Illinois. It requires matching or nonelective employer contributions and follows federal SIMPLE IRA rules.
Other accepted plans include 401(k)s, 403(a)/(b), SEP IRAs, and others.
A payroll deduction IRA allows employees to contribute to their own Traditional or Roth IRAs through payroll. However, Illinois does not currently treat a standalone payroll deduction IRA as a qualified retirement plan for the exemption.
Illinois Secure Choice and a payroll deduction IRA both use payroll-based employee contributions, but they are not interchangeable for exemption purposes. The state program determines whether a specific arrangement meets the exemption requirements.
How Employers Certify an Exemption
An employer that offers or contributes to a qualified retirement plan is not automatically recorded as exempt. The employer certifies the exemption through the Illinois Secure Choice employer portal.
The employer uses its program access code and federal employer identification number (FEIN) to access the portal and provide the requested plan information. The submission records the employer’s exemption certification with the state program.
The confirmation and related plan records document the exemption certification. The state program determines whether the employer meets the exemption requirements.
How the Two Options Differ
Illinois Secure Choice and qualified employer-sponsored plans differ in their contribution rules, administration, and available plan features.
- Employer contributions: Illinois Secure Choice does not require employer contributions. Employer contribution requirements depend on the qualified plan type; a SIMPLE IRA requires matching or nonelective contributions.
- Administration: Under Illinois Secure Choice, the employer provides employee information and remits payroll deductions. Qualified plans have their own setup, documentation, and administrative requirements.
- Plan structure: Illinois Secure Choice follows standardized program rules and offers a defined investment menu. Qualified plans may have different eligibility, contribution, and investment provisions.
- Investment choices: Illinois Secure Choice offers a curated selection of approved securities, while a retirement plan at IRA Club SBS allows for both public investment opportunities and access to alternative investment options such as real estate.
The primary distinctions are whether the employer contributes, which administrative responsibilities apply, and what plan features are available to employees. Employers using a qualified retirement plan must also certify their exemption from Illinois Secure Choice.
Frequently Asked Questions
What is Illinois Secure Choice?
Illinois Secure Choice, now called My Illinois Savings, is Illinois’ state-facilitated automatic-enrollment payroll deduction IRA program. Employers subject to the mandate must register for the program unless they offer or contribute to a qualified retirement plan and certify an exemption. Eligible employees may opt out or change their contribution elections under the program’s rules.
Do all Illinois employers have to participate in Illinois Secure Choice?
No. A private-sector employer generally must participate if it employed five or more employees in Illinois during every quarter of the previous calendar year, has operated for at least two years, and does not offer or contribute to a qualified retirement plan. An employer with a qualified retirement plan can certify an exemption.
Can an employer opt out of Illinois Secure Choice?
An employer cannot opt out simply by choosing not to participate. An employer that offers or contributes to a qualified retirement plan can certify an exemption through the state program’s employer portal. The state program determines whether the exemption requirements are met.
What happens if an employer does not comply?
A covered employer may be assessed $250 per affected employee for the first calendar year of noncompliance and $500 per affected employee for each subsequent noncompliant calendar year. After receiving a notice of proposed assessment, the employer has 120 days to file a protest or come into compliance before the assessment becomes final.
Can a SIMPLE IRA satisfy the Illinois retirement requirement?
A SIMPLE IRA plan is one plan type Illinois recognizes as a qualified retirement plan. An employer that offers or contributes to a SIMPLE IRA can certify an exemption, subject to the state program’s requirements and determination.
Is a payroll deduction IRA an option for Illinois employers?
Yes. A payroll deduction IRA allows employees to contribute to their own Traditional or Roth IRAs through payroll. However, Illinois does not currently treat a standalone payroll deduction IRA as a qualified retirement plan for the Illinois Secure Choice exemption. An employer subject to the mandate must still participate in the state program or offer or contribute to a qualified retirement plan recognized by Illinois and certify an exemption.
Illinois Retirement Plan Options
Illinois Secure Choice is one way for covered employers to meet the state mandate. An employer may instead offer or contribute to a qualified retirement plan and certify an exemption.
A SIMPLE IRA plan is among the plan types Illinois recognizes as qualified when applicable requirements are met. Other accepted plans include 401(k)s, SEP IRAs, and more. It requires matching or nonelective employer contributions. A payroll deduction IRA is an employee-funded savings arrangement, but it is not currently a qualified plan for the Illinois Secure Choice exemption.
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For comparison, Colorado employers face a similar requirement through Colorado SecureSavings.
