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State Senator Daniel Biss (D-Evanston) secured Senate passage today of the Illinois Secure Choice Savings Program Act, an innovative solution to the private sector retirement security crisis. More than 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.
“We’re facing a looming retirement security crisis: 2.5 million Illinois workers lack access to employer-sponsored retirement plans,” Biss said. “Unless we act now to help give Illinois residents the tools to save, the number of retirees living in poverty will continue to grow. The Secure Choice program will have a minimal impact on the state and participating businesses, but the effect for workers will be the difference between a retirement in dignity and a retirement in poverty.”
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 any employee 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; pooling the individual accounts would simply 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. It’s also a solution that puts little to no burden on the state or employers.”