State of Illinois Secure Choice Program

Wednesday, May 22, 2019

As you are probably aware, the state of Illinois has started a retirement program for individuals employed in Illinois who do not have access to an employer sponsored retirement plan. This program is called the Illinois Secure Choice Retirement Savings Program and has started to require companies to enroll employees. The registration deadline for companies of 100-499 employees is in July 2019 and companies with 25-99 employees will be required to register in November 2019. Employers who do not sponsor a retirement plan or comply with the Illinois Secure Choice Savings Program could face penalties of $250 per employee per calendar year.

Many employers will be faced with the decision of whether to offer a qualified retirement plan to their employees, or move forward with offering the Illinois Secure Choice Program.  If you need assistance guiding these prospects to a qualified retirement plan, ARS offers free demonstrations for prospective clients.  We are available for consultation as your resource for qualified retirement plans.  

Employers affected:

- Companies operating in Illinois for two years or more

- 25 or more employees

- Do not offer an employer sponsored retirement plan, including qualified retirement plans.

Advantage of qualified retirement plans compared to the Secure Choice Program:

- Qualified plans offer pre-tax or after-tax Roth contributions. Secure Choice contributions are invested into a Roth IRA, no pre-tax contributions are possible.

- Highly compensated employees can contribute to a qualified plan. In Secure Choice, Roth IRA modified Adjusted Gross Income limits apply, so many owners and other highly paid employees will not be able make contributions.

- Qualified plan employee contributions can be up to $19,000 in 2019, or $25,000 for individuals age 50 or more. IRA contribution limits apply for Secure Choice, so the IRA limits of $6,000 per employee or $7,000 for individuals age 50 or more apply for 2019.

- Employer contributions can be made and are discretionary each year in qualified plans. No employer contributions are allowed in Secure Choice. Many employees will not be able to save enough from only their own wages for retirement. Employer contributions are a major part of accumulating enough money for retirement.

- Qualified retirement plans can potentially exclude part-time, seasonal and other shorter terme types of employees if certain requirements are met. Seasonal employees who work more than 60 days and part-time employees are eligible for Secure Choice.

- Employers can choose the investment manager and the investment funds available in a qualified retirement plan. The state of Illinois chooses the investment manager and the investment funds available in Secure Choice.

- Non-taxable loans are allowed in qualified plans. Loans are not allowed in Secure Choice.

- Qualified retirement plans can limit withdrawal options so employees maintain their accounts for retirement or older age. Withdrawals allowed anytime under Secure Choice, so employees may not keep enough money in Secure Choice for retirement.

Feature Qualified Plan Secure Choice Program
Type of Employee Contributions Allowed Pre-tax 401(k), Roth 401(k) Roth IRA only
Restrictions on who can make contributions No restrictions Roth IRA AGI limits apply
Contribution Limits $19,000 plus $6,000 catch-up $6,000 plus $1,000 catch-up
Employer Contributions May be made May not be made
Exclusions Classes of employees, such as seasonal and project, may be excluded in testing passes Seasonal employees working at least 60 days and part time employees are eligible
Investment Direction Employers choose the investment company and advisor The state of IL chooses the investment company and investment advisor
Loans Allowed Not an option
Distributions Can be restricted to ensure monies for retirement Allowed at any time, no restrictions

Please contact Administrative Retirement Services, Inc. if you want to discuss the benefits of a qualified retirement plan instead of the Secure Choice program.

© Administrative Retirement Services, Inc. 2019 

Published by Administrative Retirement Services, Inc., Copyright 2019 by Administrative Retirement Services, Inc. Reproduction in whole or in part is prohibited except by written permission. All rights are reserved. Information has been obtained by Administrative Retirement Services, Inc. from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Administrative Retirement Services, Inc. or others, Administrative Retirement Services, Inc. does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Readers should seek specific advice before acting with regard to the subjects mentioned here.