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.”