Illinois Secure Choice Program Details for Small Business Owners
By Nicole Young on November 30, 2022
Small businesses make up 99.99% of all companies and 36% of small businesses don’t offer a retirement plan to their employees. Due to these employees not being offered a retirement plan, in 2018, the Illinois Secure Choice Savings Program Act was passed. While the Act is not new, small business owners will need to act before the end of the year or face financial penalties. Financial Advisor, Will Howson, CFP, CFPA, put together a short guide to help business owners navigate the actions they may need to take to adhere to the Illinois Secure Choice Savings Program Act:
State of Illinois Retirement Plan requirements:
- Any small business in Illinois with 15+ employees is required to set-up a retirement plan by 12/31/22.
- Any small business in Illinois with 5-15 employees is required to set-up a retirement plan by 11/15/23. Registration is open, now!
- The State of Illinois monitors the deadlines and administers the penalties.
- 403(b) and 457 plans do count as retirement plans for the aforementioned businesses.
- Small business owners can set-up a plan at any 401(k) provider or can use the Illinois Secure Choice program.
Exemptions
- Employers who have less than 5 employees or
- Have been in business for less than 2 years or
- Already have an employer sponsored plan
Illinois Secure Choice Program (through Ascensus)
- Only after-tax (Roth) contributions are allowed.
- Roth contributions follow Roth IRA income limits.
- IRA contribution limits apply ($6,500 or $7,500 for 50 and older in 2023).
- No employer matching contributions are allowed.
Timeline/Process:
- Register on Illinois Secure Choice.
- Small business owners will need their EIN and Illinois Secure Choice Access code to enroll. These can both be requested via email on the Illinois Secure Choice website.
- After registration, the small business owner has 30 days to submit the required employee census information online.
- Small business owner must wait at least 30 days from initial enrollment for first payroll contributions to take place (hypothetically the quickest timeline is 30 days if all employee information is submitted immediately).
Penalty:
- If a small business owner does not register, one year of non-compliance will equate to a $250 fine per eligible employee.
- If after one year, the small business owner still does not register, the fine raises by $500 per eligible employee each year after the first non-compliant year.
- The state of Illinois will hand out the fine, not Illinois Secure Choice.
Investment choices:
- Blackrock Target Dates
- Capital preservation fund (State Street money market)
- Conservative fund (Schwab US Agg Bond Index)
- Growth fund (Schwab S&P 500 Index)
Costs:
- To Employee: $0.75 for every $100 in their balance
- To Employer: Nothing
Illinois Secure Choice was initiated to help increase the access and awareness of retirement plans to employees in small businesses. If you are a small business owner and need help setting up a 401(k) plan for your business, please don’t hesitate to reach out to us, we are here to help.
Written By: Will Howson, CFP ®, CFPA: Will Howson started his financial services career on the east coast at one of the largest asset management firms, which provided terrific training to later come home to Chicago as an advisor at a wealth management company. Will focused on investment management, financial planning and qualified plan consulting, and created an educational curriculum for institutional and individual clients. Howson has developed trusted relationships with his clients and realized his passion for communicating with people and helping them achieve their life goals. Will loves that he can work every day at Private Vista with colleagues who share that same enthusiasm.
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