The Illinois Secure Choice Retirement Savings Program (“Secure Choice”) is designed to make it easier for employees to save for retirement. It is a mandatory, state-sponsored retirement savings program for covered employers that do not offer their employees a qualified retirement plan, such as a 401(k), profit-sharing, simplified employee pension (SEP), or SIMPLE IRA plan.

Although Secure Choice first took effect in 2018, initially it was limited to larger employers. Since November 1, 2023, however, it has applied to all businesses with five or more employees — virtually every restaurant in Illinois.

Are you required to participate?

Your restaurant is required to participate in Secure Choice if it:

• Has five or more employees;
• Has been operating in Illinois for at least two years; and
• Does not offer a qualified retirement plan

The number of employees is based on the number of full- and part-time employees you report to the Illinois Department of Employment Security for unemployment insurance purposes during all four quarters of the previous calendar year. Practically speaking, however, very few restaurants will have less than five employees.

What is required?

The good news is that Secure Choice is designed to be relatively hands-off for businesses. There are no fees for employers nor are they required to make contributions to employees’ savings accounts. Participating employers’ obligations are limited to:

• Providing certain information about the program to employees;
• Facilitating employee enrollment; and
• Implementing a system for making payroll deductions and transferring employee contributions to the Secure Choice plan

Many payroll companies can provide assistance with this process.

How do contributions work?

If you are required to participate in Secure Choice, you must automatically enroll employees in the program at a contribution rate of 5% of wages — increasing by 1% per year, up to a 10% maximum — unless they select a different deferral percentage or elect to opt out of the program altogether.

Contributions are deposited into Secure Choice Roth IRA accounts. These accounts are subject to the annual contribution limits applicable to all IRAs (currently, $7,000; $8,000 for employees age 50 or older). The limits apply to total annual contributions to traditional and Roth IRAs, so it is important for employees to keep track of their contributions to all IRAs and ensure that they stay within the limits. There are also income limits on Roth IRA contributions. Currently, taxpayers with modified adjusted gross income of $161,000 or more ($240,000 for married couples filing jointly) are ineligible to contribute to a Roth IRA. For participants in this situation, Secure Choice offers a traditional IRA option.

What about tipped employees?

The Secure Choice program works the same way for tipped employees as it does for others. In some rare cases, however, it is possible that a tipped employee’s paycheck will not be large enough to fund Secure Choice payroll deductions. In that case, the employee may be able to make arrangements for contributions to be transferred from his or her bank account. This situation is increasingly unlikely, however, as minimum wages continue to rise in many localities.

What are the penalties for noncompliance?

Employers that are required to participate in Secure Choice but fail to do so are subject to penalties of $250 per employee for the first year and $500 per employee for each subsequent year.

What are the next steps?

If your restaurant is covered by Secure Choice, or will be soon (because you are approaching your second anniversary, for example), the first step is to determine whether you wish to participate in the program or set up a qualified retirement plan for your employees. If you elect to participate in Secure Choice, the next step is to register for the program at https://employer.ilsecurechoice.com.

ORBA can help you weigh the pros and cons of Secure Choice and various other retirement savings options. If you decide to enroll in Secure Choice, we can help you set up systems for fulfilling your obligations under the program.

For more information about Secure Choice and other retirement savings plans, please contact Jim Pellino at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Restaurant Group.