Fight Looms Over ‘Secure Choice’ Plan

Story updated Dec. 4, 2014

On Wednesday Dec. 3, the Illinois General Assembly passed the state’s Secure Choice (Work & Save) Retirement Savings bill. The bill is now on its way to be signed by Gov. Pat Quinn, D, who supports the measure. Illinois’ Secure Choice will be the first state law in the country which implements a work and save program. AARP Illinois, the AARP national office and local AARP volunteers strongly advocated for passage of the bill in the final hours of the state’s end of year “Veto Session.”

By Lisa Bertagnoli

For years, Carolyn Hicks has been pushing her employees to start saving for retirement.

“It’s an educational thing,” said Hicks, who owns Renaissance Adult Day Services Inc., a Chicago-based firm that provides day and in-home care for older adults. Hicks, in business for 20 years, doesn’t offer a 401(k) or other savings program to her roughly four dozen employees. “I haven’t found one that fits our needs.”

Hicks said she’d love to offer one, though, as it would make her more competitive with other service firms that do offer a savings plan to staff members. Retirement plans “are a value-added service.”

In her desire to encourage employee savings while keeping her business competitive, Hicks has become a fan of the Illinois Secure Choice Savings Program Act. The legislation, which passed the state Senate in April and is expected to come before the state House this month, would establish a retirement savings plan for workers at businesses with 25 or more full-time employees.

There’s a difficult path to enactment, though. The bill passed the Senate with just the required 30 votes. Proponents include the National Association of Women Business Owners, the Illinois Black Chamber of Commerce and the American Society of Pension Professionals & Actuaries.

Opponents include the National Federation of Independent Business (NFIB), the Illinois Chamber of Commerce and the Illinois Manufacturers’ Association.

More than half the state’s workers—2.5 million people—have no access to employment-based retirement savings.

“We have a blind spot in our society for long-term planning,” said state Sen. Daniel Biss (D-Evanston), sponsor of the Senate bill.

Employees could save on their own but don’t. “Inertia is an incredibly powerful force,” he said.

Data from the Employee Benefit Research Institute indicate that only about 5 percent of workers without an employer-sponsored retirement plan open and consistently contribute to one on their own.

The bipartisan legislation—the concept of which was based on a 2006 report by the Heritage Foundation and the Brookings Institution—would require businesses that have been in existence for at least two years, employ 25 or more people and don’t already offer a retirement savings plan to participate.

The plan would set up individual retirement accounts (IRAs) for workers, who would contribute 3 percent of their wages, via payroll deductions, to the accounts. Employers would not be required to match contributions, and employees could opt out if they wished or contribute a higher percentage of their income. The accounts would be portable and follow workers from job to job.

A seven-member board chaired by the state treasurer would oversee the program, and the plan’s funds would pay administrative costs. To get started, the board would either solicit foundation grants or accept a two-year loan of about $15 million from the state. Financial firms would compete to win a contract to manage the fund. After being set up, the plan would be cost-neutral to the state.

AARP Illinois supports the legislation. “We know Social Security and personal savings aren’t enough for retirement,” said Bob Gallo, AARP Illinois state director. “This offers an easy option for employers.”

Opponents resist the idea. “Small businesses don’t like the government to tell them what to do,” said Kim Maisch, the NFIB Illinois state director.

The savings idea isn’t unique; more than a dozen states are mulling similar programs. If the Illinois bill is passed and signed into law, it would take effect next June and be the nation’s first state-created auto-enrollment IRA program.

The House is expected to consider the measure during the session that begins the week before Thanksgiving.

To contact your legislator, call 800-719-3020.
Lisa Bertagnoli is a freelance writer living in Chicago.