New Savings Plan is Preparing to Launch

By Lisa Bertagnoli

Two years ago, Carolyn Hicks worked to ensure passage of the Illinois Secure Choice Savings Act. It proposed a plan for about 2.5 million Illinois workers who don’t have access to a job-based retirement savings plan.

In January 2015, then-Gov. Pat Quinn (D) signed the bill into law. Secure Choice should be up and running early in 2018.

“I am elated,” said Hicks, owner of Renaissance Adult Day & Homemaker Services, based on Chicago’s South Side. She estimates that about a third of her 50 employees will choose to participate in the program.

Many “are living oftentimes day to day and not planning for their future,” Hicks said. “If they had a vehicle for savings, and were educated right, they’d do it,” she said.

In making Secure Choice a law, Illinois joined six other states in helping working residents save for the future.

“This will be an opportunity for people to do that which they know they need to do,” said state Treasurer Mike Frerichs (D).

The state, which will administer Secure Choice, estimates that 1.2 million people will participate in the plan. Companies that employ 25 or more people, have been in business for at least two years and do not currently offer a retirement savings program are required to participate. Those with fewer than 25 employees, or in business for less than two years, may participate but are not required to.

Automatic enrollment
Employees will be automatically enrolled and can opt out at any time. The default savings option is 3 percent of each paycheck; employees can change their investment amounts at any time, but the federal government limits the amount that can be invested and have taxes deferred.

Illinois’ current budget appropriates funds for Secure Choice. However, authority to spend the money was not granted, due to what Frerichs’ office deems an “oversight,” a spokesman said. The spokesman said he expects this to be rectified during the General Assembly’s veto session, scheduled for this month.

Between now and the early 2018 launch date, “there’s a lot of work to be done,” Frerichs said.

So far, the state has assembled a committee of seven to shepherd implementation. The state may lend Secure Choice the money it needs—the amount hasn’t been determined—to launch.

Over time, participants will invest billions of dollars, and pay investment fees, just as they would if they invested with a brokerage firm. Those fees will fund the program and repay the state loan.

“Once the program is up and running, it can pay for itself,” said state Sen. Daniel Biss (D-Evanston), who sponsored the bill. “But that clearly takes time.”

The Secure Choice board is searching for a private investment firm to handle the retirement accounts, as well as a program manager to make sure the money is invested properly. Communication and education are crucial.

AARP is planning programs next year to “ensure that employers that qualify or will be required to participate understand what this is, and their role in it,” said Ryan Gruenenfelder, manager of advocacy and outreach for AARP Illinois. It will also reach out to workers to show them the benefits of the program and encourage them to enroll.

Carolyn Hicks is already promoting Secure Choice to her employees. “I am just so excited that it’s happened,” she said. “If I can provide them an instrument for their future and the future of their children, I feel great.”

Lisa Bertagnoli is a writer living in Chicago.