Retirement in the Land of Lincoln: The Illinois Secure Choice Savings Program Act

Source: Edward A. Zelinsky, Yeshiva University – Benjamin N. Cardozo School of Law, Cardozo Legal Studies Research Paper No. 456, May 18, 2015

From the abstract:
Illinois has now become the first state to complete legislative enactment of a state-mandated, state-operated retirement system for private employers. As it debated, the Illinois General Assembly had before it The California Secure Choice Retirement Savings Trust Act, adopted earlier by California’s legislature. The Illinois legislation, as enacted and signed by the governor, bears obvious similarities to the earlier-adopted California law. However, the Illinois statute also makes notable departures from the California legislation.

As a legal matter, the Illinois private sector retirement plan will pass muster under both the Internal Revenue Code (Code) and the Employee Retirement Income Security Act of 1974 (ERISA). The Illinois accounts will qualify as Roth IRAs under the Code. The Illinois program will not be an ERISA-regulated employee benefit plan but, rather, will be an IRA payroll deposit arrangement. Even if the Illinois arrangement is an ERISA-governed plan, Illinois employers and the state itself will have no ERISA liability.

That, as a matter of law, the Illinois private sector retirement arrangement qualifies under the Code and ERISA does not mean that this arrangement is sound as a matter of policy. The choices made by Illinois’ legislators are noteworthy because they represent the choices of the first state to authorize a state-operated, state-mandated private sector retirement program. Those choices are thus an important contribution to a critical national debate, but will not end that debate.