Public plan for private workers.

• Author: Petrini, Anna
• Position: TRENDS

Illinois enacted a groundbreaking law in January that, depending on who's talking, either paves the way to a secure retirement for millions of private sector workers or overburdens small businesses and clashes with federal law.

The Illinois Secure Choice Savings Program Act creates the nation's first state-sponsored, automatic enrollment, Roth IRA (Individual Retirement Account) program for private sector employees who have no employer-sponsored retirement savings account program available to them. Officials estimate there are around 2.5 million of these workers in Illinois. Only a half of private sector workers currently participate in any form of employer-sponsored retirement plan.

Participation will be mandatory for established employers that do not offer retirement plans and have 25 or more employees. It will be optional for smaller and newer employers. Employees will automatically contribute 3 percent of their paychecks, unless they elect a higher amount or opt out altogether, but no employer match or contribution is required.

Supporters want to capitalize on employee inertia and economies of scale. According to the bill's chief sponsor, Senator Daniel Biss (D), the legislation "creates a tool that allows people to use a payroll deduction to save for retirement, even if their employer doesn't currently have a plan. It automatically enrolls people so you have a higher rate of participation [and] it puts people into big pools so they are not paying high fees."

Opponents are wary of what...