Retirement savings plans are one of the most sought after employee benefits. And if you’re a small business owner in California or Illinois, offering these types of plans to your employees is mandatory. Recent legislation has mandated that businesses in California with five or more employees and businesses in Illinois with 25 or more employees must offer retirement benefits.
The state of Illinois paved the way as the first in the nation to implement a mandatory, state-run retirement savings program for private-sector employees.
Governor Pat Quinn signed the Illinois Secure Choice Savings Program Act into law on January 4, 2015. The goal is to promote greater retirement savings for private-sector employees in a convenient, low-cost and portable way.
Breakdown of the Law
Who it applies to: Both for-profit and nonprofit employers with 25 or more Illinois employees that do not already offer their employees retirement benefits.
Requirements: Employers must automatically enroll employees (ages 18 or older) at a 3 percent payroll deduction. Employees are able to opt out of the program or elect to defer a different percentage of wages or dollar amount.
Fines for noncompliance are assessed by the Illinois Department of Revenue and will be $250 per employee per year or $500 per employee for subsequent years.
The Golden state is also no stranger to bold legislation changes. The city of Los Angeles raised its minimum wage to be one of the highest in the country. So it may come as no surprise that lawmakers have passed the California Secure Choice Retirement Savings Trust Act, requiring all small businesses to offer retirement benefits to their employees.
Forty-five percent of California’s private-sector workers ages 25-64 work for an employer who sponsors a retirement plan. This is less than the national average of 53 percent.
Nearly half of California workers (public and private) are on pace to retire with incomes below 200 percent of the federal poverty level.
How this Will Affect Your California Business
You will be required to offer a retirement account to your employees or they will be automatically enrolled in the Secure Choice Retirement Savings Program with an option to opt out. You will also have to have a payroll deposit arrangement with your payroll provider that allows your employees to participate in the program.
How PrimePay Can Help
We’re proud to introduce our EZ IRA option that will provide you with an affordable option that allows an employee to fund either a pre-tax or Roth IRA without the administrative cost or required employer match.
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