The recently enacted Illinois Secure Choice Savings Program Act creates, for the first time in any state, a tax qualified savings program for employees of employers with more than 25 employees who do not have a 401(k) or other employee retirement program. The law will go into effect June 1, 2015, but provides 24 months for an administrative board (the “Savings Board”) to be created, federal tax qualified status to be obtained, and information packets to be developed and distributed to employers for distribution to employees.
Unless an employee opts out of the program, the law provides that an employee of an employer subject to the act must deduct a minimum 3% of the employee’s wages, up to the federal 401(k) contribution limit if the employee chooses, to be deposited in a Roth IRA-type fund managed by the Savings Board. Employers are not required to contribute on employees' behalf but will have to pay administrative expenses. Failure to comply will result in fines issued by the Illinois Department of Revenue. Because the law is written in broad terms, details of how this law will operate in practice will have to be fleshed out by the Savings Board over the next two years.