Amendments to Illinois Secure Choice Act

AT A GLANCE

• Eligible employers with 5 or more employees are required to enroll
• Automatic increase in contributions up to 10% of wages
• New Enrollment dates for employers with less than 25 employees
• Changes in penalties for employers who fail to enroll an employee.

The Illinois Secure Choice program is for employers that do not already offer a savings plan and helps employees save money for retirement through payroll deductions. The act was originally introduced and applied to employers with 25 or more employees.  Recent amendments to the act under HB 0117, now require employers with 5 or more employees to enroll if they do not already offer a retirement plan.

Eligibility Requirements

Eligible employees are any individual who is employed by an employer and has wages that are allocable to Illinois during a calendar year under Illinois Income tax, section 304(a)(2)(B). Employees must meet the retirement plan eligibility requirements under state and federal laws.

Covered employers under Illinois Secure Choice must have:

• Employed at least 5 employees in the state during every quarter of the pervious calendar year.
• Have been in business at least 2 years.
• In the preceding 2 years, have not offered a qualified retirement plan, including but not limited, a plan under Section 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b) of the IRS code (IRC).

Employers must notify the Illinois Secure Choice Board that they would like to participate. Employers are not required to participate in the plan if they offer another plan.

Contributions

Default contributions are set in accordance with established limits for IRA’s in the IRC. Contribution rates may be set at a default rate between 3% and 6% of an enrollee’s wages. The amendments allow for an automatic increase to the contribution rates based on a provided schedule, up to a maximum of 10% of enrollee’s wages.

Enrollees may select a contribution level into the fund, as either a percentage of wages or a dollar amount up to the deductible amount for the taxable year under Section 219(b)(1)(A) of the IRC. Enrollees may also change their contribution level at any time, subject to the Board rules. Failure to select a contribution level, will result in a default contribution rate.

Employees who have not opted out of enrollment, may be automatically enrolled.

Enrollment Dates

New enrollment deadlines for employers with less than 25 employees are included in the amendments.

• Employers with 15 to 25 employees must enroll by September 1, 2022.
• Employers with at least 5 employees, but no more than 15 employees, must enroll by September 1, 2023.

Penalties

An employer who fails to enroll an employee, without reasonable cause, will be subject to a penalty of $250 per employee for the first calendar year the employer is non-compliant, and $500 per employee for each subsequent calendar year. Subsequent calendar years, do not have to be consecutive.

Next Steps

Employers should review the agency website in the coming weeks, and if necessary, make plans to enroll by the deadlines.

Paylocity supports 180 integration with Illinois Secure Choice, and Company Administrators can use the Paylocity Marketplace to request vendor integration.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.