Overview
On December 3, 2014, the Illinois legislature passed the Illinois Secure Choice Savings Program Act (the Act or the Program). 30 ILCS 105/5.855 (Dec. 3, 2014). The Program will not be effective for at least 24 months (Act §60). The Act requires private sector employers that do not already maintain a retirement plan to enroll their employees in automatic “payroll deposit retirement savings arrangements” and to remit after-tax payroll deductions to a separate trust fund (State Fund or Fund) established by a state-run board (Act §15). Illinois thus joins the ranks of the several states that have made varying attempts to require private-sector employers to make contributions to payroll deduction IRAs. (See e.g., the California Secure Retirement Savings Trust Act, signed into law by California governor Jerry Brown on September 28, 2012.)
Outgoing Democratic Governor of Illinois Patrick Quinn signed the Act on January 4, 2015, and the Act becomes effective on June 1, 2015. The Act provides, however, that implementation must occur within 24 months of the effective date (Act §60), but only after the Illinois Secure Savings Board obtains adequate “start-up” funds for implementation (Act §93) and obtains a ruling from the Department of Labor as to whether the Employee Retirement Income Security Act (ERISA) applies to the Program. Act §95. The Act further provides that the Program will not be implemented if “the IRA arrangements offered under the Program fail to qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the Internal Revenue Code [(the Code)] or if it is determined that the Program is an employee benefit plan and state or employer liability is established under [ERISA].” Act §95. An IRA for this purpose is defined under the Act as “a Roth IRA under Section 408A” of the Code. Act §5.
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