The Illinois Senate today approved a program designed to encourage retirement savings by private sector workers.
Sponsor Daniel Biss (D-Evanston) says the Illinois Secure Choice Savings Program Act would offer a solution to “a looming retirement security crisis.”
Biss says over 2.5 million Illinois workers — more than half the state’s private sector workforce — do not have access to retirement savings plans through their employers.
“Unless we act now to help give Illinois residents the tools to save, the number of retirees living in poverty will continue to grow,” Biss said in a statement.
Secure Choice would give portable savings accounts — similar to traditional IRAs — to all employees of businesses with 25 or more workers that have been in existence for at least two years and don’t already offer retirement plans.
Other businesses could participate voluntarily. Automatic withdrawals would invest three percent of workers’ paychecks in their accounts each pay period, but employees could change their contribution rate or opt out at any time. Participants would also be able to select from higher-risk and lower-risk investment options.
Neither the state nor employers would contribute to Secure Choice retirement accounts, but pooling the individual accounts would allow for lower fees and diversified, professionally managed investments.
All administrative costs would be covered by participant contributions. Businesses would not be responsible for running or funding the program, nor would they be liable for the performance of their employees’ investments.
“We know that automatic enrollment is the only way to ensure that workers, particularly those in low-wage occupations, don’t retire into abject poverty,” Biss said.
“Establishing these portable, low-risk accounts is the most efficient and least intrusive way to help hard-working Illinois residents safeguard the dignity of their later years, Biss added. “It’s also a solution that puts little to no burden on the state or employers.”
Secure Choice Retirement Plan
Only one problem with their plan and that is ERISA. A plan covering employees of private employers will be covered by ERISA and subject to the same rules as 401(k) plans. All of the state's "expertise" in running retirement plans is worthless here. they have zero experience dealing with ERISA rules and regulations because governmental plans are exempt from ERISA.
the blind leading the blind
I know that the good Illinois Senator is active in trying to solve the “current” pension crisis (which started over 40 years ago) , but methinks it would be in the interest of Illinois residents if all of our states elected politicians were barred by law from ever again giving pension advise or forcing pension legislation. If the owners of private industry did to their employee pension plans what our elected officials (both past and present) did to the state worker’s pensions, they would have been thrown in jail for life. Yet we informed citizens continue to vote for these same politicians. To quote a comic character from the past “We have met the enemy, and they are us”.
Hear Hear. Fortunately the bill was amended before being passed in the senate requiring US DOL approval. The only problem with that is that the DOL could well approve, depending on how they ask the question, with the caveat that it is subject to ERISA (which I agree there is no way around – just look at the 2012 DOL opinion to Connecticut). That might not be enough to kill the program as worded, subjecting Illinois employers to mind-numbing costs and compliance responsibility/liability. These politicians run on a pure "belief system", and there is no science or true responsible actions.
I wish all these lawmakers
I wish all these lawmakers would take the time to understand what is involved under ERISA and think it through before just shooting from the lip. Who/What is going to oversee these plans? Who will take care of the day-to-day administration? Track participant contributions to make sure they're applied to the correct account and not embezzled? File the annual 5500 form? That's great – we're going to set up a pension plan, we'll all vote affirmatively, and we can all brag to our constituents that we're doing everything we can to make things better.
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