The Illinois Secure Choice Savings Program requires employers with at least 25 Illinois employees to set up a state-sponsored IRA based retirement program if they do not already have a retirement plan. Although the program is funded solely by payroll contributions from employees, subject employers must go through an online registration and enrollment process, forward payroll contributions to the program custodian and provide program information to employees (click here for more details).
A similar program was adopted in California and was challenged in court. Although the U.S. Department of Labor had issued favorable guidance as to the impact on these state programs of ERISA, the federal pension law, Congress rescinded this guidance with the change of administration in 2017. This presented the issue of whether or not ERISA would “pre-exempt” these state programs and impose burdensome federal compliance responsibilities on employers.
A U.S. District Court in California held in Howard Jarvis Taxpayers Ass’n v. California Secure Choice Ret. Savings Program on March 29, 2019 that the California program was not subject to federal law and could be implemented on its terms. Because the California program is very similar to the Secure Choice Program in Illinois, the California case may remove the Secure Choice Program from legal limbo. Although the California decision is not binding in Illinois (and it could be reversed on appeal), this makes it less likely that ERISA-related litigation will impede the Secure Choice Program.
Employers that do not currently sponsor a retirement program for their Illinois employees need to consider retirement plan options to the Secure Choice Program such as a 401(k) plan. For employers with 100-499 Illinois employees, the Secure Choice compliance deadline is July 1, 2019 (employers with 25-99 employees have until November 1, 2019 to enroll in the Secure Choice Program – or set up an alternative arrangement). Employers with 500 or more Illinois employees who have no retirement plan need to scramble – their Secure Choice compliance deadline, November 1, 2018, has already passed.
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