August 14, 2018
To the Honorable
Members of
The Illinois House of
Representatives,
100th General
Assembly:
Today,
I return House Bill 4923 with specific recommendations for change.
When
the Secure Choice Savings program was implemented, there were valid concerns
raised about the unintended consequences of mandating participation in the
program. For example, there are legitimate issues raised that the program will
result in fewer small retirement plans being offered by employers, the possibility
that existing small plans may be terminated, and concerns about the viability
under federal law of this program.
Rigorous
economic analysis studying these effects has yet to satisfy concerns about
unintended consequences. Furthermore, federal guidance on the relationship of
state programs like this to federal ERISA law has changed since the underlying
legislation was passed, and the Illinois Secure Choice program in particular
has suffered from delays and poor implementation. While this legislation as
passed makes some marginal beneficial changes to the reporting structure of
Secure Choice to better monitor its investments and progress, a change that
could actually provide some comfort about the uncertainty surrounding the program
would be to make it optional for employers to participate in as a retirement option
for their employees.
Therefore,
pursuant to Section 9(e) of Article IV of the Illinois Constitution of 1970, I
hereby return House Bill 4923, entitled “AN ACT concerning employment”, with
the following specific recommendations for change:
On
page 1, by replacing line 5 with “is amended by changing Sections 45, 60, 65,
and 80 as follows:”
On
page 2, immediately after line 24, by inserting the following:
“(820
ILCS 80/60)
Sec.
60. Program implementation and enrollment. Except as otherwise provided in
Section 93 of this Act, the Program shall be
implemented, and enrollment of employees shall begin in 2018. The Board shall
establish an implementation timeline under which employers shallmay
enroll their employees into the Program. The timeline shall include the date by
which an employer mustmay begin enrollment of its employees into
the Program and the date by which enrollment must be complete. The Board shall
adopt the implementation timeline at a public meeting of the Board and shall
publicize the implementation timeline. The Board shall provide advance notice
to employers of their enrollment date and the amount of time to complete
enrollment. The Board's implementation timeline shall ensure that all employees
are required to be enrolled into the Program by December 31, 2020. The
provisions of this Section shall be in force after the Board opens the Program
for enrollment.
(a) Each employer shallmay establish a payroll deposit retirement
savings arrangement to allow each employee to participate in the Program within
the timeline set by the Board after the Program opens for enrollment.
(b) Employers shallmay automatically enroll in the Program each
of their employees who has not opted out of participation in the Program using
the form described in subsection (c) of Section 55 of this Act and shallmay
provide payroll deduction retirement savings arrangements for such employees
and deposit, on behalf of such employees, these funds into the Program. Small
employers may, but are not required to, provide payroll deduction retirement
savings arrangements for each employee who elects to participate in the
Program. Small employers' use of automatic enrollment for employees is subject
to final rules from the United States Department of Labor. Utilization of
automatic enrollment by small employers may be allowed only if it does not
create employer liability under the federal Employee Retirement Income Security
Act.
(c) Enrollees shall have the ability to select a contribution level into the
Fund. This level may be expressed as a percentage of wages or as a dollar
amount up to the deductible amount for the enrollee's taxable year under
Section 219(b)(1)(A) of the Internal Revenue Code. Enrollees may change their
contribution level at any time, subject to rules promulgated by the Board. If
an enrollee fails to select a contribution level using the form described in
subsection (c) of Section 55 of this Act, then he or she shall contribute the
default contribution rate of his or her wages to the Program, provided that
such contributions shall not cause the enrollee's total contributions to IRAs
for the year to exceed the deductible amount for the enrollee's taxable year
under Section 219(b)(1)(A) of the Internal Revenue Code.
(d) Enrollees may select an investment option from the permitted investment
options listed in Section 45 of this Act. Enrollees may change their investment
option at any time, subject to rules promulgated by the Board. In the event
that an enrollee fails to select an investment option, that enrollee shall be
placed in the investment option selected by the Board as the default under
subsection (c) of Section 45 of this Act. If the Board has not selected a
default investment option under subsection (c) of Section 45 of this Act, then
an enrollee who fails to select an investment option shall be placed in the
life-cycle fund investment option.
(e) Following initial implementation of the Program pursuant to this Section,
at least once every year, participating employers shall designate an open
enrollment period during which employees who previously opted out of the
Program may enroll in the Program.
(f) An employee who opts out of the Program who subsequently wants to
participate through the participating employer's payroll deposit retirement
savings arrangement may only enroll during the participating employer's
designated open enrollment period or if permitted by the participating employer
at an earlier time.
(g) Employers shall retain the option at all times to set up any type of
employer-sponsored retirement plan, such as a defined benefit plan or a 401(k),
Simplified Employee Pension (SEP) plan, or Savings Incentive Match Plan for
Employees (SIMPLE) plan, or to offer an automatic enrollment payroll deduction
IRA, instead of having a payroll deposit retirement savings arrangement to
allow employee participation in the Program.
(h) An employee may terminate his or her participation in the Program at any
time in a manner prescribed by the Board.
(i) The Board shall establish and maintain an Internet website designed to
assist employers in identifying private sector providers of retirement
arrangements that can be set up by the employer rather than allowing employee
participation in the Program under this Act; however, the Board shall only
establish and maintain an Internet website under this subsection if there is
sufficient interest in such an Internet website by private sector providers and
if the private sector providers furnish the funding necessary to establish and
maintain the Internet website. The Board must provide public notice of the
availability of and the process for inclusion on the Internet website before it
becomes publicly available. This Internet website must be available to the
public before the Board opens the Program for enrollment, and the Internet
website address must be included on any Internet website posting or other
materials regarding the Program offered to the public by the Board.”
With
these changes, House Bill 4923 will have my approval. I respectfully request
your concurrence.
Sincerely,
Bruce Rauner
GOVERNOR