The law, which passed the Illinois General Assembly during the 2014 veto session, will automatically enroll workers without access to an employment-based retirement plan into the program. While workers can opt out, participants will build savings in a Roth Individual Retirement Account (IRA) through payroll deductions. All accounts will be pooled and professionally managed by an investment firm hired by the State, thereby keeping fees low and ensuring competitive investment performance. The State will not have any access to the workers’ funds.
The Illinois Secure Choice program takes aim at the growing retirement insecurity crisis by providing easy access to a work-based savings option, allowing workers to build a nest egg beyond what they will receive from Social Security. In Woodstock Institute’s 2012 report, Coming Up Short, we found that more than 2.5 million private-sector workers in Illinois do not have access to a retirement savings account through their employer. The report found that lack of access is most pronounced for low-wage workers, of whom 60 percent lack access, but also serious even for workers making $40,000 or more, of whom 49 percent do not have access to an employment-based retirement savings plan. In every legislative district in Illinois, over half of private-sector workers do not have access to this type of plan.
This new law will change that. It applies to businesses with more than 25 employees, that have been in existence for two years, and don’t already offer a retirement plan. Businesses with fewer employees can choose to participate as well. The program is expected to be up and running in 2017 and may serve as a model for other states to create similar retirement savings programs.
State Senator Daniel Biss and State Representative Barbara Flynn Currie spearheaded the effort. Governor Quinn and Treasurer-elect Frerichs were also very supportive of the new measure. At the bill signing, all four elected officials discussed the importance of helping workers save their own money for retirement as a supplement to Social Security benefits. Woodstock Institute and our allies, including the Illinois Asset Building Group, the Shriver Center, Heartland Alliance, AARP, and SEIU, worked diligently to build public awareness of the problem and support for a solution and are now focused on implementation. We are grateful for the efforts of advocates, community organizations, and policymakers that made this program a reality. All workers should be able to easily save their own money for retirement and retire with dignity.
Visit our flickr album to see pictures from the event.