Local businesses face fines for lack of compliance with retirement plans

PEORIA (Heart of Illinois ABC) – Half of Americans have less than $5,000 saved for retirement. A state initiative aims to change that, with some hefty fines if businesses don’t comply.

The ‘Illinois Secure Choice Program’ was started in 2018, offered to employers who don’t already have a plan in place for their employees. It’s entirely funded by worker savings, and the state says it makes it easier for employers to make sure their employees are saving for retirement. Businesses not enrolled in the program have to offer an alternative like a 401K or Roth IRA instead.

“We have an obligation to help people save their own money and make their own investment decisions to have a brighter future,” says Illinois State Treasurer.

With so few putting money away, Frerichs calls the situation a ‘crisis.’

“People find themselves in their fifties or sixties with nothing saved for their retirement and realize they’re not going to be able to achieve their dream.”

But it’s not entirely optional. According to the official filing, businesses with 16 or more employees have until November 1 to enroll in the program or create their own offerings. If they don’t, the business can be fined $250 for each employee for the first year they aren’t enrolled, with a $500 charge each consecutive year.

There are also federal tax incentives available for the first three years that businesses apply. New legislation in the works would also increase the number of credits businesses might get on a case-by-case basis.

Not many businesses are even aware of the voluntary program.

“Unfortunately, I haven’t spoken with many businesses who say they have had contact conversation or heard it directly from the state,” says Jason O’Brien, a Peoria financial advisor with Edward Jones.

The state is putting emphasis on the positives.

“We’re not focusing on the penalties,” says Frerichs. “We’re focusing on the employers setting up and registering their employees.”

“The last thing you want to do is be in a situation where your back is up against the wall and be forced into a plan that may not be right for you,” notes O’Brien.

He adds business owners need to explore their options, working with experienced professionals to come to their own decision, since other alternatives might better suit each case.

“Being able to work with an expert who knows the pros and cons of each side to make an informed decision would be my best piece of advice.”

After this year’s November 1 deadline, the final date will be November 1 2023, applicable for businesses with five or more employees.

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