Mandatory Retirement Plans For Small Business

Small businesses are now required to offer mandatory retirement plans to their employees. Here’s what’s new in Illinois right now:

The Illinois Secure Choice Savings Program Act (Secure Choice Savings Act) requires certain Illinois employers to offer retirement benefits with a state-run payroll-deduction Roth IRA. Employers must comply if they meet all of the following criteria: (1) have 25 or more employees, (2) have been in operation at least 2 years; and (3) they don’t currently offer an employer-sponsored retirement plan.

The required registration date is July 1, 2019 for employers with 100 or more employees, and November 1, 2019 for employers with 25 to 99 employees. The Act does require employer contributions. Employees are automatically enrolled with a deferral of 5 percent of pay, unless they opt out or choose a different savings rate. Employees can opt out or adjust their contribution rate at any time.

Why Does it Matter To Illinois Employers?

The Act imposes penalties of $250 per employee per year (increasing to $500 per employee per year) for non-compliance. Mandatory savings may also lead to calls by lower-wage workers to raise wages to offset the hit on take home pay resulting from the automatic savings deduction. Employers should consider this impact as they plan the timing and communications around their rollout of wage increases to comply with the separate recently-enacted increases to the Illinois minimum wage.

What Should You Do Now?

Be on the lookout for correspondence from Secure Choice inviting your business to register with the program. If your business already offers a retirement plan, you will need to claim an exemption. After the rollout date, you must inform employees of the program and automatically enroll them into the program. You must also hold an annual open enrollment period for any employees who opted out of the initial enrollment and administer payroll deductions and deposits into program accounts.


What Else is Coming?

  • No Salary History Act (HB 834) The Illinois House will vote soon on HB 834, referred to as the “No Salary History” Act. HB 834 would amend the Illinois Equal Pay Act to make it unlawful for an employer to ask about prior wages of applicants. The bill aims to end this common hiring practice that many believe contributes to the gender wage gap by perpetuating income inequalities. Ahead of the law’s enactment, employers would be wise to conduct (or refresh) a legally-privileged pay equity audit to ensure that men and women are paid equally for comparable work and that any questionable pay disparities are corrected promptly and properly.


This story is part of an ongoing series highlighting legal changes that Illinois employers must know now. We’ll keep you updated on the latest legislation, as well as pending legislation.

Gary Savine is an Illinois employment lawyer and founder of Savine Employment Law, Ltd. in Chicago. Gary regularly advises businesses on recently enacted employment laws and performs employment compliance audits and investigations for employers.