Proposal would require businesses with 5 or more workers to offer retirement savings plan

The threshold for small businesses in Illinois to be required to offer workers a retirement savings plan would drop from 25 employees to five if legislation supported by Illinois Treasurer Michael Frerichs becomes law.

Businesses that meet the threshold are required to offer employees a 401(k) retirement plan or auto-enroll employees in Illinois' Secure Choice Savings retirement savings program, which automatically steers a percentage of pay into a retirement account.

Each individual employee can opt out of the program after being auto-enrolled. Frerichs says the program itself and the proposed amendment are ways to combat a "retirement crisis in Illinois and the country."

"We offer Secure Choice because the biggest indicator of if someone is saving for retirement or not is if they have a workplace retirement savings option," Frerichs said. "If they do, they are 15 times more likely to save for retirement than someone who doesn't. We think the answer is to give more people the opportunity to save with automatic workplace deduction."

Under current law, each employee enrolled in the program contributes 5% of his or her wages to a Roth IRA administered by a financial planning company selected by the state. Under the proposed amendment, that amount would increase annually until it reaches 10%. Employees can choose to contribute more.

Courtney Eccles, the director of Secure Choice in Illinois, told the Senate State Government Committee, which passed the amendment Wednesday, that about 6,000 business are enrolled in the program so far, with 85,000 workers who have saved a combined $57 million for retirement. Eccles said the proposed amendment would add a "significant number" of businesses to the program, making "tens of thousands" more employees eligible.

The deadline for new businesses to comply would be no earlier than September 2022 Eccles said. Employers not compliant with the law can face a penalty of $250 per employee after one calendar year of noncompliance and $500 per employee for each subsequent calendar year not in compliance.

The amendment passed through committee with two no votes coming from Republicans Craig Wilcox of McHenry and Win Stoller of Peoria.

"I may be a 'no' in committee, but that doesn't mean it will carry over to a floor vote," Wilcox said.

The National Federation of Independent Businesses opposes the amendment. Illinois Director Mark Grant said the opposition is because the law is a mandate on small businesses.