Illinois Secure Choice: A Guide for Employers

The Illinois Secure Choice Savings Program is a state-facilitated retirement savings option for private-sector employees who lack access to a workplace plan. The program functions as a Roth Individual Retirement Arrangement (IRA), where employees save for retirement through automatic payroll deductions. The state oversees the program, which private financial partners administer to expand retirement savings access across Illinois.

Employer Eligibility and Exemptions

A business must participate if it is a “covered employer,” defined as a private-sector business operating for at least two years with five or more Illinois-based employees during every quarter of the preceding calendar year. The employee count is determined using the employer’s quarterly filings with the Illinois Department of Revenue. This count includes part-time and seasonal employees who work for more than 60 days, as well as owners and shareholders taxed as employees.

A business that meets the definition of a covered employer is exempt from the mandate if it already provides a qualified retirement plan. An employer offering one of the following alternatives must certify its exemption through the state’s portal:

• 401(k) or 401(a) qualified plans
• 403(b) tax-sheltered annuities or 403(a) qualified annuity plans
• Simplified Employee Pension (SEP) IRAs
• Savings Incentive Match Plans for Employees (SIMPLE IRAs)
• Governmental 457(b) plans

Program Requirements for Covered Employers

For employers required to participate, the primary responsibility is to facilitate the program for their employees. The first step is to register the business on the official Illinois Secure Choice website. Any newly covered employer must complete this registration to begin the process. There are no direct fees or costs for employers to participate in the program.

After registration, the employer must provide and maintain an accurate roster of all eligible employees. This requires submitting employee data to the program administrator, including each person’s full name, Social Security number, and contact information. The roster must be kept up-to-date by adding new hires and removing employees who have separated from the company.

Ongoing obligations include distributing official program information to all employees, explaining how the plan works and their right to opt out. Employers must also integrate the program with their payroll system to handle automatic deductions and remit employee contributions to the program administrator. The employer does not make contributions and holds no fiduciary responsibility for investment outcomes.

The Enrollment and Contribution Process

Once an employer is registered and has uploaded its employee roster, eligible employees are automatically enrolled in the program. The default contribution rate is set at 5% of their gross pay. Before any deductions start, employees receive a 30-day notification period with all the necessary information to make a decision about their participation.

During this 30-day window and at any time thereafter, employees can opt-out of the program entirely. An employee can also choose to participate but at a different contribution level, either increasing or decreasing the 5% default. All contributions are made on a post-tax basis into a Roth IRA, meaning withdrawals in retirement are tax-free.

The program also includes an automatic annual increase feature, where an employee’s contribution rate will go up by 1% each year until it reaches a maximum of 10%. Employees can also select their own investment options if they do not want their funds placed in the default target-date fund. The employer’s role is limited to processing payroll deductions as directed by the employee’s choices within the Secure Choice system.

Penalties for Non-Compliance

The Illinois Department of Revenue enforces the Secure Choice mandate, and employers who fail to comply with the law face financial penalties. These penalties are assessed against any covered employer that does not register with the state or facilitate the program for its employees as required.

For the first calendar year an employer is non-compliant, a penalty of $250 per eligible employee is assessed. For example, a company with 10 employees would face a $2,500 penalty for that year. If an employer continues to be non-compliant into a second or any following calendar year, the penalty increases to $500 per eligible employee.