While inflation remained low through 2016, certain key benefit plan limits have increased slightly for 2017. Last week the IRS officially announced those limit adjustments for various health, retirement and fringe benefit plans. General IRS information about these notices is available here for Health & Welfare plans and here for Retirement plans.
The IRS determined that the increase in cost-of-living index was insufficient to trigger an adjustment in many annual limits for 2016.
A new law makes Illinois the first state in the nation to put in place a mandatory, state-run retirement savings program for private-sector Illinois employers. Just before leaving office last month, former Illinois Governor Pat Quinn signed into law a measure to create the Illinois Secure Choice Savings Program.
The law takes effect on June 1, 2015 and requires the program to be implemented within 24 months. This program is subject to two things: 1) favorable determination this program is not subject to ERISA; 2) initial program funding by the state.
This new law and program will not impact or apply to private-sector Illinois employers who are offering an employer-sponsored retirement plan at the time the law is implemented.
Below are FAQs covering the highlights of the new law and how it impacts employers.
What are the highlights of this new Illinois law?
Private-sector employers in Illinois must offer this Illinois operated retirement savings program to their employees upon implementation of the law if the employer:
- Has been in operation for at least two years, and
- Has at least 25 employees, and
- Does not offer an employer-sponsored retirement plan
Is my company/our organization exempt from this new Illinois law because we offer an employer-sponsored retirement plan?
Illinois employers are exempt from the new law if an employer-sponsored plan (assuming you continue to maintain your plan throughout the implementation of the law). An Illinois employer will be exempt from this law if they offer a 401(k), an ERISA 403(b) plan, any other type of ERISA retirement plan, or a SIMPLE or SEP, and that plan is operational on and after June 1, 2017.
Will this new law impact or make any new requirements on our current retirement plan’s provisions, design or operation?
There is no impact on employers who currently offer a plan. You must simply continue to offer your employer-sponsored retirement plan to be exempt from this new law and program.
How will this new law apply to my company/our organization if we do not have an employer-sponsored retirement plan when the law goes into effect?
- Illinois employers not exempt from this law must automatically enroll their employees in this new state retirement savings plan upon implementation of the law. Employees may individually opt out.
- Employers must make a 3% of pay IRA deduction and send it to each employees’ IRA under this program; participants will be able to adjust the percentage of their pay they have deducted.
- IRA deductions under this program will be sent into a new state-run pooled investment fund; a Board is being established under this law to design and oversee this new Illinois pooled investment fund.
- At least once a year employers not exempted from this program must offer an open enrollment period to allow employees who opted out of the program to enroll.
- Employers who do not offer an employer-based retirement plan AND who fail to offer the Secure Choice program will subject to annual fines; fines start at $250 per employee in year one for those not automatically enrolled (unless they opt out), and increase to $500 per employee in year 2 and thereafter for those employees not annually automatically enrolled (unless they annually opt out).
What should my company/organization do if we not currently offer an employer-sponsored retirement plan and do not want to be subject to the new Illinois mandate?
Employer initiated, designed and sponsored employee benefits are more flexible, effective and attractive than government-mandated alternative programs. Contact BPC at 800-355-2350 for a no-cost complementary retirement plan design conversation and cost estimate.
Where can I read more about this new Illinois law?
BPC is always ready to help guide employers through matters related to your current retirement plan or a prospective new plan. Contact us at 800-355-2350.
On December 15, 2014 The Secretary of the Treasury issued regulations establishing myRA accounts. These regulations were issued in response to President Obama’s directive to create government-backed personal retirement savings accounts starting 2015. The goal of government’s myRA program is to increase personal retirement savings.
What are the main highlights of myRA?
A voluntary retirement savings option for workers.
- Targeted at low-and-middle income American workers who do not have access to employer-sponsored retirement plans.
- Allows workers to save for retirement using after-tax contributions and withdraw the money in retirement tax-free (no tax on earnings).
- Savers can participate in myRA until their account balance reaches $15,000, or 30 years, whichever occurs first.
- Invests solely in a savings bond backed by the U.S. government.
- Savers can transfer their myRA account balance at any time to a commercial financial services provider of Roth IRA’s.
- Savers can withdraw their contributions at any time but withdrawals of interest before age 59 ½ incur taxes/penalties like a traditional Roth IRA.
What theme does myRA, the recently signed Illinois Secure Choice Savings Program, and the USA Retirement Funds Act being considered by Congress seem to have common?
The theme is to encourage employers, possibly require employers in federal legislation, to offer a retirement savings program to their employees and for employees to start saving and to save more for retirement.
Given this theme what options are available now for employers?
For employers already sponsoring a sponsoring a plan, continue offering a retirement plan and regularly encourage workers to save and save more for retirement. If new legislation or regulation impacts the design requirements of your plan BPC will assist you.
For employers not offering a retirement plan, offer one on your terms. The emerging theme points to offer a plan of your choosing and design that provides tax-advantages to both your company and your employees---or be forced to offer a government designed plan. Employer initiated retirement plans are historically more flexible, effective and attractive than government-mandated options.
For employers with a plan not with BPC and for employers not offering a retirement plan, contact BPC at 800-355-2350 to discuss your retirement plan goals and options and our retirement plan service.