Illinois Secure Choice ‘May’ Offer More Choice

Illinois’ mandatory auto-enrollment state-IRA program for private sector employers, Illinois Secure Choice, “may” have just become voluntary.

Illinois Governor Bruce Rauner (R) issued what’s called an amendatory veto on Aug. 14, which made technical changes to the Secure Choice program to change the meaning of the legislation.

The original measure, signed into law in 2014, requires employers with more than 25 employees to provide either a retirement plan or participate in the state’s Secure Choice plan. Rauner changed wording that said employers “shall” offer Secure Choice to “may” – and in the process, provided employers the option to not offer the program.

'Valid Concerns'

In his veto message, Rauner, who is running for reelection in November, noted that “valid concerns” have been raised about the program, which he said could result in:
 

• fewer small retirement plans;
• the terminations of existing small plans; and
• concerns about the program's “viability under federal law.”

“Rigorous economic analysis studying these effects has yet to satisfy concerns about unintended consequences," Rauner wrote, according to Pensions & Investments. "Furthermore, federal guidance on the relationship of state programs like this to federal ERISA law has changed since the underlying legislation was passed, and the Illinois Secure Choice program in particular has suffered from delays and poor implementation. While this legislation as passed makes some marginal beneficial changes to the reporting structure of Secure Choice to better monitor its investments and progress, a change that could actually provide some comfort about the uncertainty surrounding the program would be to make it optional for employers to participate in as a retirement option for their employees."

“Safe” Harbored

Concerns about the conflicts with federal law is a concern that others have expressed following President Trump’s signing of legislation in 2017 overturned the Obama administration’s ERISA safe harbor rule for state-run auto-IRA programs for private sector workers. While that arguably undermined the clarity and encouragement that the Obama administration had sought to provide these programs, it didn’t necessarily undo the work that has been done or stop the state-run initiatives already underway. Oregon’s has been underway for a year, and California’s is close. Indeed, at the time, California plainly stated that the Golden State didn’t need that safe harbor to proceed.

The program, currently in a pilot phase, is expected to be fully launched for employers with 500 or more employees by November. For employers with 25-49 employees and 100-499 employees, the program is expected to be fully launched next year.

Next Steps

Rauner’s action isn’t necessarily the end of things; legislators could:
 

• approve the change;
• let die the technical changes bill to which Mr. Rauner's action applies; or
• override the amendatory veto.

In a news release Wednesday, Illinois Treasurer Michael W. Frerichs (who is currently charged with overseeing the program) called the veto "a shameful attempt to try to undermine a bipartisan program and deny private-sector workers the chance at a secure retirement."

The legislature is expected to take up an override of the veto this fall, according to WAND News.