Employers with Plans Excluded from Illinois’ State-Run Plan

By Andrew Remo • April 01, 2016 • 0 Comments
In Illinois, if you are an employer that likes your retirement plan, you can keep it.

Despite some persistent rumors and underhanded marketing to the contrary, the Illinois Secure Choice Savings Program Act — enacted in early 2015 — provides that if an employer covered under the law already has a retirement plan, that employer is excluded from the law, and therefore does not have to meet any additional retirement plan coverage requirements.

In other words, employers with plans do not have to worry about making any changes to their current plan, or provide access to the state program, to cover 100% of their employees. In addition, the legislation contains a provision that allows employers covered under the law to adopt a private plan such as a defined benefit plan, 401(k), SEP, SIMPLE or auto-IRA program at any time instead of participating in the state program.

It would take a pretty twisted reading of the law to conclude otherwise. But the ASPPA GAC team, upon hearing these rumors and seeing some of the marketing materials, did our due diligence to further confirm that this was not the case. We immediately reached out to a senior official in the Illinois State Treasurer’s office with this coverage question. (The State Treasurer chairs the Illinois Secure Choice Board created by the bill and is in charge of the program’s implementation).

The senior official assured us that the State Treasurer is not considering requiring employers with private plans to make the state program available to employees not eligible to participate in those plans. The official said that — even if you assumed that there was a desire to cover those individuals — to do so would be a nightmare to administer so as to make the operation of the state program cost-prohibitive.

To recap: The new law creates a state-run auto-IRA program and also requires all Illinois businesses with 25 or more employees to offer their workers some type of retirement program. This requirement does not kick in until the state program becomes operational, which is not expected until spring 2017 at the earliest. The board is expected to outsource both the administration and the recordkeeping of the state-run auto-IRA program to private vendors. The board has yet to issue a request for proposal (RFP) for those contracts, but such an RFP is expected to be released sometime in late spring or early summer of this year. We will keep you posted as Illinois continues down the path to full implementation of the law.

Andrew Remo is the American Retirement Association’s Director of Congressional Affairs.