Navigating state-mandated retirement savings programs can be a complex task for business owners. The Illinois Secure Choice Savings Program is one such initiative designed to help employees save for their future. This blog post aims to provide business owners with crucial information about the IL Secure Choice Act, including who is required to participate and what responsibilities employers have.
Who is Affected?
The IL Secure Choice Act applies to employers in Illinois with five or more employees. If your business falls under this category, it is mandatory to participate in the program, unless you already offer a qualified retirement plan such as a 401k.
Understanding Employee Status
To clarify who qualifies as an employee under the Act, it’s important to note that it encompasses all individuals on your payroll, including full-time, part-time, and seasonal workers. This means that regardless of their employment status if you have five or more individuals working for your business, you are required to participate in the IL Secure Choice program.
Employer Liabilities and Protections
One of the key concerns for business owners is the potential legal liabilities associated with employee participation in the IL Secure Choice program. Fortunately, participating employers are explicitly absolved of any fiduciary or other legal liability regarding employee enrollment decisions.
The Act states:
“(a) Participating employers shall not have any liability for an employee’s decision to participate in, or opt out of, the Program or for the investment decisions of the Board or of any enrollee.
(b) A participating employer shall not be a fiduciary, or considered to be a fiduciary, over the Program. A participating employer shall not bear responsibility for the administration, investment, or investment performance of the Program. A participating employer shall not be liable with regard to investment returns, Program design, and benefits paid to Program participants.”
ERISA Fiduciary Bonds Exemption
Additionally, it’s worth noting that the IL Secure Choice program is not subject to worker protections under ERISA (Employee Retirement Income Security Act). This means that employers who participate in the IL Secure Choice program are not required to obtain ERISA Fiduciary Bonds.
Penalties for Non-Compliance
For employers who fail to enroll employees in the program without reasonable cause, the Act outlines penalties. The penalties are structured as follows:
- $250 per employee for the first calendar year of noncompliance.
- $500 per employee for each subsequent calendar year of noncompliance. Importantly, noncompliance does not need to be consecutive for the $500 penalty to apply.
The Department will determine the total employee count using the annual average from employer-reported quarterly data.
The Illinois Secure Choice Savings Program is an important initiative aimed at helping employees secure their financial future. As a business owner, understanding your obligations and protections under the IL Secure Choice Act is crucial. By participating in this program or offering an employer-sponsored retirement plan, you not only support your employees’ financial well-being but also ensure compliance with state regulations. For further details, you can refer to the full text of the Act here.
