Illinois Secure Choice: Understanding Your Options
We recently sat down with Kara Kudukis of ADP to discuss Illinois Secure Choice, a state-sponsored retirement program for employees that do not have access to a retirement savings plan through their employer. This retirement plan is required for all businesses with at least 25 employees. Kara provided us with the following details on this program:
- IL Secure Choice accounts are a Roth Individual Retirement Arrangement (IRA)
- There are 4 fund selection options: capital preservation, growth fund, target date fund, and conservative allocation
- There is no tax benefit to the owner and parts as the owner isn’t contributing anything to the retirement program.
- Roth IRA deductions are after tax (401K is before tax). The rules for withdrawals can be found here.
- The maximum yearly contribution is $6,000 total
- After age 50 you can contribute an additional $1,000 a year
- If you make over 137K you cannot participate and are you are limited in how much you can contribute if you make between 122K-137K
- There is some ongoing manual work for the owner such as managing your contributions
- No monthly/yearly fees to the owner
- Penalties and fines may be incurred if you don’t have some kind of retirement program after the effective date
- No matching or profit sharing allowed
- No loans can be taken from the account
- There are 3 Fund Providers: State Street, BlackRock, and Charles Schwab
- There is a 1.00% fee on all assets in the account (Roth IRA)
Employers that satisfy the following criteria are subject to the Secure Choice program:
- Have at least 25 employees as reported to the Illinois Department of Employment Security (IDES) for unemployment insurance payments;
- Have been operating in Illinois for at least two years; and
- Do not offer a qualified retirement plan to any Illinois employees. (A qualified retirement plan under sections 401(a), 401(k), 403(a), 403(b), 408(k), 408(p), or 457(b).)
If you are a business with at least 25 employees and are unsure about your options or next steps, please reach out to us and we would be glad to discuss!