Download a fact sheet about access to employment-based retirement savings in Illinois


Read Woodstock Institute Vice President Spencer Cowan’s testimony on H.B. 4497


Low-income workers, particularly those in the service industry and those that are part-time, tend to be employed by businesses that do not currently offer access to retirement savings plans. Without access to employment-based retirement savings plans, Illinois residents will lack sufficient assets to support themselves in retirement. Currently, Social Security accounts for about 40 percent of retirement income (down from 52 percent in 1981), leaving many with insufficient finances in their retirement.


“Lack of access to retirement savings is a contributing factor to Illinois’ growing asset poverty rate—one that, if not addressed, will increasingly erode the financial security of our families,” says Karen Harris, Director of the Asset Opportunity Unit at the Sargent Shriver National Center on Poverty Law and an IABG partner.


“Older Americans are a growing percentage of our population and are not adequately prepared for the financial needs of their retirement,” says Spencer Cowan, Vice President of Woodstock Institute. “Illinois needs a public policy solution that allows workers to save for their future, no matter where they work.”


Automatic Individual Retirement Accounts are an innovative solution that can bridge the retirement savings gap, especially for low- to moderate-income workers. Automatic IRA legislation (H.B. 4497 / SB 3278) was introduced this year in the Illinois General Assembly.


Under H.B. 4497/SB3278, small employers with more than 10 and less than 100 employees, who have been in business for at least 2 years and who have not, during such 2 year period, offered a retirement plan would be required to automatically enroll their employees in a payroll deduction direct deposit Automatic IRA account. Employees could opt-out of this plan at any time.


To increase efficiency and economies of scale, these Auto IRA accounts would be pooled and administered by the Illinois Treasurer’s Office. Start up costs for the Treasurer’s Office could be minimized to the greatest extent possible by using the State’s existing 529 college savings structure as a platform for the Automatic IRA accounts. Additionally, as the accounts grow, the start-up costs and administrative costs would be repaid from the proceeds generated from the accounts and the program would become self-sustaining.


According to Nancy Nelson, Manager of Advocacy and Outreach for AARP Illinois, the Automatic IRA program is “a low-cost and common sense solution to the problem that too many Americans are saving too little for retirement or aren’t saving at all. This is largely due to the fact that too few employers provide access, either by choice or by need, to an employment-based retirement savings vehicle.”


Almost all larger firms administer a retirement plan for their workers. By establishing a retirement account that small businesses can successfully administer, the Automatic IRA proposal provides small employers with a competitive benefit at a minimal cost.


Auto IRAs are a tool that Illinois workers can use to help them save for their own retirement. When given an opportunity to save, low-income families do save and save at a higher percentage of their income than do more wealthy families. Auto IRAs are a chance to give Illinois workers the opportunity to build financially secure futures.


More information about the Automatic IRAs, including written testimony from the hearing and fact sheets, can be found at the IABG website.