Illinois Secure Choice: Which Employers Must Register and the Penalties

What Is My Illinois Savings (Illinois Secure Choice)?

My Illinois Savings, formerly known as Illinois Secure Choice, is the state's automatic individual retirement account (auto-IRA) program. Illinois enacted this mandate to address the retirement savings crisis facing working people without access to employer-sponsored retirement plans. If you're an Illinois employer, you may be required to offer this program or register an exemption with the state. Unlike other retirement mandates, you don't have to contribute to your employees' accounts, you just have to offer them the option to save.

This program was created under the Secure Choice Savings Program Act and represents Illinois' commitment to expanding retirement security. Understanding whether your business must participate is essential to avoid penalties and stay compliant with state law.

Who Must Register: The Employer Mandate

Not every Illinois business must register for My Illinois Savings. The mandate applies to specific employers based on size, tenure, and existing retirement benefits. The law aims to capture established businesses without qualified retirement plans already in place.

You are subject to the employer mandate if all of the following apply:

• You have 5 or more Illinois employees in every quarter of the prior calendar year
• Your business has been in operation for 2 or more years
• You do not currently maintain a qualified retirement plan (such as a 401(k), 403(b), SEP-IRA, or SIMPLE IRA) that meets IRS requirements

If any one of these conditions does not apply to your business, you may not be covered by the mandate. However, you should verify this with the state administrator, as rules and thresholds can be clarified or updated.

The 5-or-More Employee Threshold

The trigger for the mandate is clear: you need 5 or more employees in Illinois during every quarter of the prior calendar year. Count employees on your payroll, including part-time workers; independent contractors are not employees.

The key word is "every quarter." If you drop below 5 employees in even one quarter, the mandate does not apply to you for that year. Conversely, if you hired your 5th employee in January and maintained that level through December, you will be newly covered the following year if your other conditions are met.

Keep careful payroll records to document your headcount by quarter. When the new mandate year begins, review whether you crossed the threshold. This is not something that can be fudged on a spreadsheet, regulators cross-check with your tax filings and wage records.

The 2-Year Business Requirement

The mandate does not apply to new startups. Your business must have been in operation for at least 2 years to be covered. This gives newly formed companies time to focus on growth and operational stability before taking on employee retirement obligations.

For businesses formed in Illinois through incorporation or LLC filing, count from your official formation date with the Illinois Secretary of State. If you're an established sole proprietorship or partnership filing an assumed business name, count from when you began operating, documentation like business tax returns or lease agreements can establish your start date.

Once you meet the 2-year mark and have 5+ Illinois employees, you move into compliance year one unless you already offer a qualified plan or certify an exemption.

The Qualified Plan Exception

If you maintain a qualified retirement plan that meets IRS requirements, you are exempt from the mandate, even if you have 5+ employees and have been in business for 2+ years. "Qualified plan" includes:

• 401(k) plans (individual or multiple-employer)
• 403(b) annuity plans (for nonprofits and schools)
• SIMPLE IRAs
• SEP-IRAs
• Defined benefit (pension) plans
• Other IRS-qualified plans

The plan must be active and currently offered to your employees. If you discontinued a plan, you cannot use it to claim exemption from the mandate, you are only covered if a plan is actually in operation.

If you are uncertain whether your current plan qualifies, consult a qualified tax advisor or contact the state administrator directly. A disqualified or improperly structured plan will not protect you from penalties.

Deadlines and Timeline for Newly Covered Employers

The deadline for newly covered employers to register or certify an exemption was November 1, 2025. If you became newly covered and did not register or certify an exemption by that date, you may already be subject to penalties. Verify the current deadline with the state program administrator, as rules may have been adjusted or extended.

Going forward, employers covered by the mandate must:

• Register for My Illinois Savings and establish a payroll deduction arrangement, or
• Certify and maintain an exemption with the state

Registration is not a one-time event. Once registered, you must maintain your enrollment status and continue facilitating employee access to the program unless you qualify for an exemption or exit.

Penalties for Non-Compliance

Failing to register for My Illinois Savings or certify an exemption carries real financial consequences. The penalty structure is tiered:

• Year 1 of non-compliance: $250 per employee per year
• Each subsequent year of non-compliance: $500 per employee per year

These penalties add up fast. An employer with 10 covered employees who fails to register in year one faces a $2,500 penalty. In year two, the penalty doubles to $5,000. Multiply this across a larger workforce and the annual cost becomes substantial.

Penalties apply to employers that fail without reasonable cause to enroll employees by the deadline. The Illinois Department of Revenue first issues a notice of proposed assessment, and the penalty is deemed assessed after 120 days unless the employer files a protest or comes into full compliance in that time.

The state has authority to enforce these penalties through administrative proceedings. Ignoring a notice or registration requirement does not make it go away. If you receive a compliance notice, respond promptly.

How to Certify an Exemption

If you believe you should be exempt from the mandate, you must formally certify that exemption with the state program administrator. Simply believing you don't qualify is not enough, the burden is on you to document and certify your exemption status.

Common exemptions include:

• You maintain a qualified retirement plan
• You did not have at least 5 Illinois employees in every quarter of the prior year
• Your business has been in operation for fewer than 2 years

Keep records that support your exemption claim in case the program asks for them. For example:

• If claiming a qualified plan, provide plan documents or a summary plan description
• If claiming too few employees, provide payroll records showing headcount by quarter
• If claiming insufficient tenure, provide your business formation documents or tax return showing your start date

Submit your exemption certification through the official state program website or contact the program administrator for the exact process. Keep a copy of your filing for your records. Your exemption status is only valid as long as the underlying conditions remain true. If you drop a qualified plan or hire your 5th employee, you must update your status and register for the program.

Where to Find Official Resources and Get Help

For authoritative information on My Illinois Savings and your compliance obligations, contact the official program administrator. You can find details through the Illinois Treasurer's Office, which oversees state retirement savings programs. The program administrator's website will have registration forms, FAQs, compliance deadlines, and contact information.

If you have questions about whether your specific retirement plan qualifies for exemption, consult a qualified tax advisor or employee benefits attorney. They can review your plan documents and advise you on compliance requirements tailored to your business.

Do not rely solely on information from third-party vendors or consultants without verifying it against official state sources. Program rules and deadlines are final when published by the state, not when someone else interprets them.

Practical Compliance Steps for Employers

If you believe you are covered by the My Illinois Savings mandate, take action now:

1. Count your Illinois employees by quarter for the prior calendar year to confirm you have 5+ in every quarter
2. Confirm your business has been operating for 2 or more years
3. Review whether you maintain a qualified retirement plan
4. If exempt, gather documentation and file a formal exemption certification
5. If covered, register with the state program administrator before the deadline and establish payroll deductions
6. Keep records of your compliance efforts, registrations, and exemption certifications

Compliance is not optional. The deadline has already passed for the initial wave of covered employers, so if you have not yet acted, address this immediately to minimize penalties.

Next Steps and Important Disclaimer

This guide provides an overview of Illinois' My Illinois Savings mandate and is intended for informational purposes only. It is not legal, tax, or financial advice. Retirement savings regulations are complex and subject to change. Your individual situation may involve nuances not covered here.

Before making compliance decisions, consult with a qualified attorney, tax professional, or employee benefits advisor who specializes in retirement plan law and Illinois regulations. They can review your specific circumstances and ensure your business is positioned correctly.

Verify all deadlines, penalties, and requirements directly with the official state program administrator before taking action. Program rules, dates, and processes may be updated, and official sources are authoritative.

Staying compliant with My Illinois Savings protects your business from penalties and demonstrates your commitment to employee retirement security. The sooner you address your coverage status, the sooner you can move forward with confidence.