Illinois Auto-IRA Bill Passes Senate, Heads to Governor’s Desk
The Illinois General Assembly has sent legislation to Gov. Pat Quinn (D) that would create the nation's first state-run automatic enrollment payroll deduction IRA program for private sector employers.
The Illinois Senate on Dec. 3 approved by a 30-25 margin a version of the bill passed earlier in the week by the Illinois House. Quinn – who lost his reelection bid in November – is expected to sign the bill into law.
The legislation includes a requirement that private employers with 25 or more employees either offer the state-run auto-IRA arrangement or be subject to a fine of $250 per employee per year. That requirement would only apply to employers that choose not to sponsor any other type of private retirement plan for their eligible employees.
The Illinois Senate initially passed the legislation in April, but the bill languished in the Illinois House for months due to opposition. However, following an extensive education and lobbying campaign by State Sen. Daniel Biss (D-Evanston), the lead sponsor of the bill, the Illinois House took up and passed the bill during its current special legislative session on Dec. 2, by a comfortable margin of 67-45.
Even if, as expected, Quinn signs the legislation, other potential roadblocks remain that may delay or block implementation of the state-run program. For instance, the bill contains language specifying that the program cannot be implemented if the federal government determines that either:
- the IRA arrangements offered under the program are not tax qualified; or
- the program is an ERISA employee benefit plan (a typical consideration in a number of these state proposals).
Additionally, the amended legislation directs the “Illinois Secure Choice Board” created by the bill to implement the program within 24 months of when the bill is signed into law. However, the program may be delayed further if the Board fails “obtain adequate funds” to implement the program. It is unclear whether these funds would be raised through public or private sources, but regardless, the earliest the requirement could kick in for Illinois businesses is 2017.
The Illinois initiative is but one of several currently underway in more than a dozen states across the nation, attempting to address concerns about the retirement readiness of an aging population, and expanding access to retirement savings vehicles for workers who currently lack access to such programs in their workplace.
The ASPPA GAC team is closely monitoring events in Illinois, and around the country, and will keep you posted.
Andrew Remo is the Congressional Affairs Manager at NAPA and ASPPA.