Small businesses are facing big changes in Illinois. In 2015, the Illinois State Legislature’s Secure Choice Act began a series of steps that ultimately led to the creation of a “State Sponsored Retirement Plan.” Now, small businesses may be forced to become participants in a retirement plan managed by the state of Illinois.
Here’s a summary of what’s going on—and how it could affect you as a business owner.
What is a State Sponsored Retirement Plan?
A State Sponsored Retirement Plan is a qualified retirement plan that is created and administered by a state government. Think of a business starting a 401(k) plan for their employees. A State Sponsored Retirement Plan has a similar structure, but it’s intended for working people who don’t have access to a retirement plan through their employer.
State Sponsored Retirement Plans typically do not require participating businesses to pay any administrative fees or contribute company dollars to the retirement pan. Illinois’ plan – called Illinois Secure Choice - operates that way. There are no fees or required contributions for businesses that participate, but they must properly distribute plan materials, facilitate enrollments and send proper payroll data in a timely manner.
Will my business be affected?
Not all companies are treated the same. You will NOT need to join the plan if:
- Your company already offers a retirement plan to your employees (Such as a 401(k), 403(b), 457(b) or other qualified plan),
- You have less than 25 employees, OR
- You have been in operation in Illinois for fewer than two years.
However, if you do not meet any of those requirements – meaning you do not offer a retirement plan, you have more than 25 employees and have been in business for more than two years – you will be required to join the Illinois Secure Choice program. If you have more than 100 employees, you will be required to join by July 1, 2019. If you have 25-99 employees, you will be required to join by November 1, 2019.
What should I do next?
- If you are required to join the Illinois Secure Choice Program:
Begin your research on the Illinois Secure Choice Program. If you do not want to join the program, you will need to start your own retirement plan before the July (100-499 Employees) or November (25+ Employees) deadline. If you do decide to join the Illinois Secure Choice plan, you should start working with your payroll company and the Illinois Secure Choice team to properly distribute materials to your employees, enroll them and send pay data files to the state. If you do not properly enroll in the plan you could faces fines from $250 - $500 per year, per employee. If you have 50 employees that could be a $25,000 fine!
- If you are NOT required to join the Illinois Secure Program:
If you are not required to join the program because you already have a qualified retirement plan for your business, that’s great. If you aren’t required to join because of your employee count or your business length, you should begin preparing for a time where you may have to join the program. You could add employees to cross the 25-person threshold. Illinois may also lower the number of employees required to join the program.
As a business owner you should control how your business operates. There are many options for retirement plans outside of the Illinois state plan. They have a wide variety of costs and benefits, but the right retirement plan choice depends on your workforce, budget, business goals and personal goals. Plancorp is always happy to discuss your options to find the one that best fits your business. Reach out to Matt on our corporate retirement plan team at (314) 392-4630, or via the form below, to see which option is best for you.
This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.