Illinois Secure Choice

What it is

Illinois Secure Choice is a state-facilitated retirement savings program for private sector workers whose employer does not offer a plan. It is not a state pension and the state does not manage the money or guarantee it. Employees are automatically enrolled into a Roth IRA in their own name, funded by payroll deduction, which follows them from job to job. The employer's role is purely administrative: run the deduction and send it on.

The design rests on a well-tested behavioral finding — that automatic enrollment with an opt-out produces far higher participation than voluntary enrollment with an opt-in, even though the choice available to the worker is identical. Illinois was among the first states to build a program on it.

Which employers must participate

Three conditions have to hold together:

• Five or more Illinois employees in every quarter of the previous calendar year;
• In business for at least two years; and
• No qualified retirement plan — no 401(k), 403(b), SEP, SIMPLE or governmental 457(b).

Fail any one and you are outside the mandate. Offer a qualified plan of your own and you are exempt, but you still have to tell the state that, rather than simply ignoring the notice. The enrollment waves ran from 2018 to 2023, ending with employers of five to fifteen employees on 1 November 2023, so every deadline has passed — a covered employer that has not registered is already accruing penalties.

What it costs an employer, and what it costs to ignore

The program charges employers nothing. There are no contributions to make and no fees. The obligations are: register, distribute the information packet, auto-enroll eligible employees, set up the deduction, remit contributions promptly — program guidance says within seven days of the deduction — and keep the roster and rates current. Employers are expressly not fiduciaries, must not answer investment questions, must not give investment or tax advice, and bear no liability for how employees' accounts perform.

The penalties are where the money is. The Department of Revenue assesses $250 per employee for the first calendar year of noncompliance and $500 per employee for every year after, and those years do not have to run consecutively. Enforcement begins with a proposed assessment allowing 120 days to comply, register, claim an exemption or request a hearing; a final assessment follows, and collection can reach liens and bank levies. For a firm with twenty employees three years behind, the exposure is $25,000 for something that costs nothing to do properly. It belongs in the same mental column as the other administrative obligations on the employer cost page — cheap to comply with, expensive to forget.

What it does to a paycheck

The default deduction is 5% of gross pay, taken after tax. On a $60,000 salary paid bi-weekly that is $115.38 per check, or $3,000 a year. The statute permits a default anywhere between 3% and 6% and allows automatic annual increases capped at 10% of wages. Employees may change the rate at any time, with a floor of 1%, or stop altogether.

Because the account is a Roth IRA, the contribution does not reduce taxable income. That is the reverse of a traditional 401(k), and it matters for the arithmetic on your stub: a 401(k) contribution reduces federal and Illinois income tax immediately but never reduces FICA, whereas a Secure Choice contribution reduces nothing now and produces tax-free qualified withdrawals later. Neither is universally better — a saver in a low bracket today generally does better with Roth, a saver in a high bracket generally with traditional — and savers who prefer the deduction can recharacterize to a traditional IRA. The way pre-tax deductions actually interact with each tax is set out on the methodology page.

Because it is an IRA rather than a workplace plan, IRA limits apply: $7,500 for 2026 plus a $1,100 catch-up from age 50. Roth eligibility phases out between $153,000 and $168,000 for single filers, and $242,000 and $252,000 for joint filers. Saver fees run around 0.75% of assets a year.

How it fits the Illinois retirement picture

Illinois is one of the friendliest states in the country for retirement income, which changes how these decisions look. The state subtracts federally taxed retirement income in full — 401(k) and IRA distributions, pensions, Social Security and railroad retirement — with no income limit and no partial exclusion. That means the Illinois half of the traditional-versus-Roth question largely disappears: a traditional contribution saves 4.95% now and the eventual withdrawal is untaxed by Illinois anyway. On Illinois grounds alone, traditional wins; the federal comparison is what actually decides it. The full picture, including how much of your Social Security ends up federally taxable, is on the Illinois retirement taxes page.

For employers weighing the alternative

Secure Choice is a floor, not a benefit. It costs the employer nothing, and it gives the employee nothing beyond a convenient payroll deduction into their own Roth IRA with retail-ish fees and IRA-level limits. An employer that would rather offer a genuine benefit has options — a SIMPLE IRA allows employee deferrals well above the IRA limit with a modest required employer contribution, and a 401(k) allows far more again — and sponsoring any qualified plan removes the Secure Choice obligation entirely. If you are pricing that decision, the employer contribution belongs in the benefits line of the employer cost calculator, where it is usually a smaller number than people expect relative to health insurance.

If you are an employee

Three things are worth knowing. You were enrolled automatically and you can stop it at any time without penalty, but the default exists because most people who opt out do not open an IRA on their own. The account is yours and portable — it does not stop when the job does. And the 5% default is a starting point rather than a recommendation; if your employer offers no match there is no matching threshold to hit, so the right rate is whatever your budget genuinely supports. To see what a change in the deduction does to your actual take-home, put it into the Illinois paycheck calculator as a post-tax deduction, since Roth contributions do not reduce taxable wages.

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