Enhanced Retirement Plan Helping Workers Save

In the 16 years since Nichole Garner opened Capelli’s Studio & Spa in Decatur, she’s researched many retirement savings plans. Her stylists and skin care specialists wanted the benefit. She wanted to offer it.

The expense got in the way.

That changed last September, when Garner enrolled in Illinois Secure Choice. The state-facilitated Roth IRA program now covers employers with five or more workers, compared with 25 previously. The shift allows Capelli’s and thousands of other small businesses to participate.

“It’s just such a super simple benefit,” says Garner, 39. Secure Choice is free for employers and integrates with her payroll accounting software. And, she adds, it gives her employees — who range in age from their early 20s to mid-40s — an easy way to save for retirement, through an automatic payroll deduction.

“Years fly by so fast, and before we know it, we get close to that age ... not even realizing we
haven’t started,” Garner says.

The lower employee threshold is the latest update to Secure Choice, which launched six years ago across the state to address lackluster retirement savings.

More than 19,000 employers in the five- to 24-employee range have enrolled since the change, according to Secure Choice Executive Director Christine Cheng. Many come from the service industry, including retail, hospitality and food service companies.

Employers in business at least two years that don’t offer a retirement plan — such as a 401(k) or pension — must enroll in either Secure Choice or a qualified plan.

In March, Secure Choice had more than $176 million in assets and more than 147,000 employee accounts — often people saving for retirement who weren’t before, according to Ryan Gruenenfelder, an AARP Illinois advocacy director. “That’s remarkable,” he says.

National push to grow plans

AARP Illinois pushed for creation of the plan, as well as its latest expansion. Nationwide, AARP has pushed state legislators to support retirement savings programs, with a preference toward automatic workplace enrollment.

In Illinois, employees at participating workplaces automatically contribute 5 percent from their paycheck, unless they adjust the percentage or opt out altogether.

AARP has collaborated with Secure Choice and the Illinois State Treasurer’s Office on outreach and education through online, TV, direct mail and social media content, as well as a booklet distributed to Crain’s Chicago Business subscribers and others.

The goal is to educate newly eligible businesses, nudge stragglers to enroll and convince employees to contribute. By year-end, Secure Choice officials hope to grow the program to 175,000 participants.

State-facilitated retirement plans are having a national moment, says Illinois Treasurer Michael Frerichs, chair of the board overseeing Secure Choice. Illinois was one of the first states to pass such a law (the governor signed it in 2015) and to get it running. In all, 18 other states have enacted programs, with 12 active and the rest in the implementation stage, according to Georgetown University’s Center for Retirement Initiatives.

Opponents have argued that opening a savings account should be a personal responsibility and that state-facilitated programs are another mandate on small businesses.

Frerichs responds that the retirement savings deficit impacts everyone. People without enough savings may work into their 70s or 80s, reducing job openings for younger people, he says. They also would likely spend less in retirement — thus hurting the economy — and possibly need to depend on the government’s safety net. A 2023 Pew Charitable Trusts study estimated insufficient retirement savings could cost Illinois $8.9 billion in added social assistance spending between 2021 and 2040.

“I would say if people aren’t saving for retirement, it’s all of our problem,” Frerichs says.

Of the 10 employees at Capelli’s, seven contribute to Secure Choice accounts. The others — and Garner — opted out because they already have private plans. Garner’s initial worries about program costs or time commitments weren’t founded.

“Once I read up and understood the program more, it was a no-brainer,” she says.

More at ilsecurechoice.com.

Sarah Hollander, a freelance writer and former daily newspaper reporter in Cleveland, has written for the AARP Bulletin for 15 years.

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