Everything Illinois employers need to know about Illinois Secure Choice — penalties, exemptions, and how to get compliant in 2026.
Illinois Secure Choice is Illinois's state-mandated retirement savings program requiring private-sector employers with 5 or more employees to either enroll workers in the state-administered Roth IRA or offer a qualifying private retirement plan. The program is administered by the Illinois Secure Choice Savings Board and is currently active with enforcement underway.
Illinois was one of the early states to implement a mandatory retirement savings program, joining California and Oregon. The program targets the significant retirement savings gap among private-sector workers in Illinois, particularly among small and mid-size businesses. Enrollment has been phased in based on employer size, with all eligible employers now required to comply.
Under Illinois Secure Choice, employees are automatically enrolled at a default contribution rate of 5% of gross wages into a Roth IRA. Employees have a 30-day window to opt out or adjust their contribution rate. Employers are responsible for enrollment facilitation and payroll deduction submission — no employer contributions are required.
The mandate applies broadly to private-sector employers in Illinois. Below is a breakdown of which employer types are covered:
| Employer Type | Covered? | Notes |
|---|---|---|
| For-profit businesses with 5+ W-2 employees | YES | Must enroll or have qualifying plan |
| Non-profit organizations with 5+ employees | YES | Non-profits are included |
| Sole proprietors with no W-2 employees | NO | No employees = no mandate |
| Employers with qualifying retirement plan | EXEMPT | Must file exemption certificate |
| Federal government employers | NO | State mandate does not apply |
| Employers with 1099 contractors only | NO | Only W-2 employees count |
| New businesses (under 2 years) | VARIES | Businesses in operation less than 2 years may be initially exempt |
Illinois Secure Choice penalties are assessed against employers who fail to either register for the program or obtain a Certificate of Exemption by maintaining a qualifying private retirement plan.
| Business Size | Year 1 Penalty | Year 2 Penalty | Year 3 Penalty |
|---|---|---|---|
| 25 employees | $6,250 | $12,500 | $12,500 |
| 50 employees | $12,500 | $25,000 | $25,000 |
| 100 employees | $25,000 | $50,000 | $50,000 |
Important: These penalties are in addition to any back-registration fees. The best way to avoid penalties is to either enroll in Illinois Secure Choice or establish a qualifying private retirement plan and file for exemption.
If your business already offers one of the following qualifying retirement plans, you are exempt from Illinois Secure Choice — but you must still file a Certificate of Exemption through the official portal at ilsecurechoice.com.
Having a qualifying plan exempts your business immediately. Note: you must actively maintain the plan and keep contributions current to maintain exempt status.
If your business does not have a qualifying plan, here is how to enroll in Illinois Secure Choice:
Alternatively, establish a qualifying private plan (401k, SIMPLE IRA, etc.) to bypass the state program entirely and potentially provide better benefits for your team.
Employers required to comply with Illinois Secure Choice have two options: enroll in the state-administered Roth IRA, or establish a private retirement plan. Here is how they compare:
| Feature | Illinois Secure Choice (State Plan) | Private 401(k) / SIMPLE IRA |
|---|---|---|
| Employer cost | $0 setup | $500–$2,000 setup; flat-fee available |
| Employee contribution type | Roth IRA only | Pre-tax + Roth options |
| 2026 contribution limit | $7,000/yr (IRA limit) | $23,500/yr (401k) or $16,500/yr (SIMPLE) |
| Employer matching | Not available | Optional (tax-deductible) |
| SECURE 2.0 tax credits | Not available | Up to $15,000 over 3 years |
| Recruiting advantage | Limited | Strong competitive benefit |
| Admin burden | Low — state manages it | Low with flat-fee TPA |
| Satisfies mandate | YES | YES |
Bottom line: For most businesses with growth ambitions, a private 401(k) or SIMPLE IRA offers better contribution limits, tax advantages, and recruiting power — often at a similar or lower net cost once SECURE 2.0 credits are factored in.
Get a free 20-minute compliance audit. We will review your Illinois mandate requirements, employee count, and recommend the best compliant plan for your business.
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