A quarter of adults within the U.S. don’t have retirement financial savings. One purpose? Not all staff have entry to an employer-sponsored retirement program. Seeing this looming disaster, Illinois launched the Safe Alternative Retirement Financial savings Program (Illinois Safe Alternative).
Like different state retirement packages, Illinois Safe Alternative mandates that each one companies with 5 or extra staff should facilitate Illinois Safe Alternative or supply a retirement plan.
Are you an Illinois employer? In that case, learn on to study the ins and outs of the mandate, together with deadlines, qualifying alternate options, and extra.
4 Questions employers might have about Illinois Safe Alternative
Illinois Safe Alternative is the state of Illinois’ retirement financial savings program. Staff can use a default Roth IRA to make a contribution with after-tax {dollars} by payroll deductions. Nonetheless, program contributors can go for a standard IRA in the event that they select. Illinois companies with 5 or extra staff should facilitate Illinois Safe Alternative or supply a certified retirement plan.
Employers who select to facilitate Illinois Safe Alternative have to confirm further details about their taking part staff and register with this system.
For workers, the (utterly voluntary!) Illinois Safe Alternative program may revolutionize the best way they save. Earlier than Safe Alternative, if an worker needed to begin an IRA on their very own, they must discover a monetary establishment that gives an IRA and arrange an account with them. However with this program, staff can save at work and contribute to a plan managed on their behalf.
By default, staff are enrolled with a 5% contribution price right into a goal date fund primarily based on their anticipated retirement age. Nonetheless, staff can select to extend or lower their price or opt-out anytime.
1. How a lot can staff contribute?
Like a standard Roth IRA, staff can contribute as much as $7,000 (in 2025) to their Safe Alternative account.
Staff who’re 50 or over can contribute as much as $8,000 (in 2025).
2. Do I’ve to take part?
Not all Illinois employers should take part within the state-mandated retirement program. You need to facilitate Illinois Safe Alternative in case you:
- Have 5 or extra staff,
- Have been in operation for at the very least two years, AND
- Don’t supply an employer-sponsored retirement plan
However once more, Illinois employers topic to the mandate do produce other choices. For those who don’t wish to facilitate the state program, you may arrange one of many following qualifying retirement plans:
- 401(a) or 401(ok) plan
- Certified annuity plan
- Tax-sheltered annuity
- Simplified Worker Pension (SEP) plan
- SIMPLE IRA plan
- Governmental tax-deferred compensation plan
- Taft-Hartley plan
Earlier than selecting between Illinois Safe Alternative and a qualifying different, contemplate what’s finest for your enterprise.
3. Are there penalties for failing to register?
There are penalties for failing to register or supply a qualifying different. For those who fail to remit contributions to this system by your deadline, you can be penalized $250 per worker for the primary yr of noncompliance.
And in case you’re nonetheless not compliant after the primary yr, your penalty will increase to $500 per worker. For extra data on penalties, take a look at the statute.
4. How can I begin a qualifying retirement program?
For those who’re an Illinois employer involved in establishing a 401(ok) for small enterprise as an alternative of facilitating the state program, assist is on the market.
Patriot and Vestwell have partnered to supply inexpensive retirement plans for small companies in Illinois and throughout america. Vestwell’s digital retirement platform immediately integrates with Patriot’s payroll software program, making it simpler so that you can supply and administer a company-sponsored 401(ok).
Anxious about administration prices? Chances are you’ll be eligible to obtain important tax credit, which will help cancel out administration prices. You’ll be able to study extra about eligibility for tax credit and the way to enroll in a 401(ok) by Vestwell right here.
This text has been up to date from its unique publication date of July 28, 2022.
This isn’t supposed as authorized recommendation; for extra data, please click on right here.