Illinois lawmakers have passed a bill that would allow 2.5 million private-sector employees without retirement plans to enroll in a Roth IRA. Both the House and the Senate passed the bill on Wednesday, and Quinn is expected to sign the measure.
Crain’s explains how the program, called Secure Choice, would work:
[The program] would apply to employees of firms with at least 25 workers who do not have access to an employer-provided retirement account.
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Under the measure, qualifying employees will be asked now or when they are hired whether they want to contribute 3 percent of their salary to a retirement account. Unless they say no, the money will be deducted from their check, just like taxes, and go into an individual Roth Individual Retirement Account that will be tax-free after retirement.
Operating much like the state’s Bright Start college savings program, a panel including the state treasurer, budget chief and several outside directors named by the governor will hire a private firm that will run the program and offer various investment options. The program, called Secure Choice, will be portable, carrying over to a new employer if a worker changes jobs. Employees can contribute more or less than 3 percent of their salary if they choose.
AARP “applauded” the passage of the bill. The group said in a press release:
“Today, the General Assembly took a monumental step toward helping to ensure a more secure financial future for small business employees in Illinois by passing Senate Bill 2758 – the Illinois Secure Choice Savings Program.”
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“The Illinois Secure Choice Savings Program means more private savings, a stronger competitive edge for small businesses, and a more secure financial future for our state. Over 2 million Illinois workers who did not previously have access to a workplace retirement plan will now have access to an Individual Retirement Account – and many small businesses in Illinois will, for the first time, be able to offer current and potential employees the benefit of a workplace retirement account.”
Some lawmakers vocally opposed the program on the grounds that it was rushed through the legislature and not enough time was put into investigating the consequences for small businesses. From Illinois Watchdog:
Representative Ron Sandack said the issue should have more investigation before another mandate is levied against small business.
“Yes, people aren’t saving up for retirement, yes we ought to do more to incentivize that,” he said. “No, we shouldn’t mandate a program that we don’t know a thing about. We shouldn’t mandate small business and encumber small business, yet again, with an expense and a burden that we really don’t know anything about.
The language of the bill – called S.B. 2758 – can be read here.
Photo credit: “Gfp-illinois-springfield-capitol-and-sky” by Yinan Chen – www.goodfreephotos.com (gallery, image). Via Wikimedia Commons