The Land of Lincoln is about to become the first state in thenation to mandate retirement savings programs in the privatesector.

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The Illinois Senate this week approved amendments to the SecureChoice Savings Program Act, which had passed the House earlier by a67-45 margin. The bill will now be sent to outgoing Gov. PatQuinn.

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If signed into law, as is expected, the act would requirebusinesses with 25 or more employees that don’t already provide aretirement plan to auto-enroll workers into an IRA, via a payrolldeduction, with the intent of “promoting greater retirement savingsfor private-sector employees in a convenient, low-cost and portablemanner.”

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Also read: Frustrated states push to fill retirement void

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Employers not willing to participate will be subject to anannual $250 fine per employee.

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Enrollees would be given the option of opting out after beingenrolled.

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The law also creates an oversight board. Fiduciary obligations willfall on the Secure Choice Savings Program Fund’s board of trustees,not on individual employers. The board will oversee the assetscollected, and be in charge of naming investment providers.

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One of the amendments in the Senate caps the annual expenses onthe funds collected at 0.75 percent, less than the 1 percentoriginally proposed.

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The Senate also amended the employer size threshold to 25employees, after it was originally set at 10.

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The Illinois Treasurer’s office projects that between $15million and $20 million will be needed to create a board oftrustees and staff, to pay advisor consultants, lawyers andactuaries, and for office space and other operating costs tooversee the program.

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Not included in those costs are potential fees charges by theIllinois Department of Revenue for enforcement costs not covered bypenalties from non-compliant employers.

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Barbara Currie, the bill’s chief sponsor in the House, saidemployers are already required to withhold income taxes and childsupport from paychecks, and that the savings requirement is “verylittle different,” according to reporting in the Illinois NewsNetwork.

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Enrollment will begin two years from the law’s expectedenactment.

Also read:
Illinois plan to cut pension shortfall struck down

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.