While retirement planning advocates are applauding Illinois’ move to become the first state in the New Year to pass retirement plan legislation, other states’ plans to do the same may not be so welcome.
Outgoing Illinois Gov. Pat Quinn signed Jan. 4 S. 2758, legislation creating a small-business retirement plan known as the Illinois Secure Choice Savings Program. When implemented, the law will require all employers that have at least 25 employees and that have operated for at least two years to either offer an employer-sponsored retirement plan or automatically enroll their employees into the new program.
“We were supportive of Illinois’ [retirement plan offering] because we believe it will actually expand coverage and encourage employers to offer a plan through a private provider,” Judy Miller, executive director of retirement policy for the American Society of Pension Professionals and Actuaries, told ThinkAdvisor in an interview Monday.
The program, which is structured like a Roth IRA, “basically says that if you have 25 or more employees you have to offer some type of plan, and the state arrangement will be the default,” Miller said. “We think that most employers will opt to go to a private provider. The key is employers are required to do something, so it will expand coverage.”
ASPPA, which represents private pension and retirement plans, opposes other states’ offerings that merely set up their own retirement plan but fail to require employers to act, Miller added. These states are “entering the marketplace to compete with private providers,” which “we oppose.”