Illinois Secure Choice at Five: $100 Million and 100,000 Savers

This week we have the pleasure of chatting with Michael Frerichs, Illinois State Treasurer. Frerichs was an active proponent of the Illinois savings program before it passed the State Legislature in 2014. As Treasurer he’s had a chance to see it through from its earliest days to expanding coverage to reach nearly 2 million workers.

Illinois Secure Choice is five years old! Let’s talk about what this means and what’s coming next.

It feels great. We're really excited because as of early January we have more than 116,000 saver accounts, savers are adding a total of $3 million to their accounts every month, they’ve saved about $100 million so far, and we have more than 9,300 registered employers covering every county in the state (Illinois is home to 102 counties). As someone who grew up in a small town in downstate Illinois, I'm very excited to see that we're covering everywhere in the state.

What do you know about the savers so far?

We have savers working in many different industries that traditionally didn't offer workplace retirement savings options, such as restaurants, beauty salons, and cleaning companies. It’s really rewarding to talk with some of these people when they say things like, “I just never thought retirement savings was an option for people like me.” I don't know if they mean because of their lower income or because of the industry they're in, but this is exactly why we set up Illinois Secure Choice — to help give greater opportunities to those who have been denied them in the past.

Employers are part of this process, forwarding employees’ savings to the program – what are they saying?

When we were trying to pass the legislation, and when we were rolling this out, we heard from several employers who were very worried. They were worried about a state mandate and about costs.

But now after they've been up and running for a bit almost all of them are saying it’s far easier than expected. Many say that they always wanted to offer a retirement savings option to their employees, but it was either too expensive or there was too much risk involved with it.

They're already sending money every pay period to the state for payroll taxes. This is a simple payroll deduction that helps out their employees with retirement.

We've had some great stories from employees who have fewer worries and concerns in their lives, when they find they go from being constantly in the red to being in the black. The employees are happier, and almost every employer we talk to is happy to have happier employees.

If they have fewer concerns, if they're not worried about things, they're more productive employees.

You are expanding the program as of late 2022. Tell us more.

When we originally proposed the program, there was a lot of resistance. Several legislators thought they didn't want to impact small businesses, so they limited the program to employers with 25 or more employees.

Based on positive feedback from employers and their employees regarding the ease of the program, we decided to make it available to a larger group of employees.

In 2021, we went back to the General Assembly to lower the threshold down to five employees or more. Because a lot of the initial resistance had evaporated, we're very excited that by the end of 2023, all employers in the state of Illinois with five or more employees should be eligible for Illinois Secure Choice.

What lessons learned would you share with states that are thinking about Auto IRAs today?

For those decision-makers looking at a state auto IRA program, the objections that many people brought up in the early days haven't been borne out.

For example, two-thirds of eligible workers are participating in the program, which shows that making savings easy by enabling the mechanism of payroll deduction at work is meaningful. And that there was already the desire and an ability to save among many workers, but they were seeking an easier way to put those funds aside for the future. And that's what we give them.

We also see that employers — even smaller employers with fewer administrative resources — are finding the program fairly easy to implement.

Smaller employers are often seeking out ways to attract talent, and we've heard many employers say that Secure Choice is, in the words of one employer, another arrow in the quiver, another benefit that an employer could offer to make them more attractive than a competitor.

If you can start with a threshold of five or more employees versus a higher threshold, our advice is start lower.

What haven't we asked?

Let’s talk about data. Implementation data is showing that we're providing retirement savings access to the segments of the population that traditionally haven't had easy access.

For instance, we have a significant number of younger workers, black workers, workers with lower levels of educational attainment, and workers at small businesses.

We've heard savers say that they've gained more confidence in their future knowing that they have a way to easily set money aside for retirement. We've also heard some savers say that they didn't think they would ever have a way to save for retirement at work due to the industry that they’re in or their level of pay.

It's been very meaningful to extend to thousands of people an opportunity that many thought was out of reach because of what has and hasn't been done historically.

Treasurer Michael Frerichs, thank you for sharing your experience and cheers both for your boldness, and for five years of savings into Illinois Secure Choice.

Treasurer Frerichs was born and raised in the small farming community of Gifford, Illinois. He graduated from Yale University and spent two years in Taiwan teaching English and learning to speak Chinese. Returning to Champaign County, he launched a technology business, was elected to the Champaign County Board and elected Champaign County Auditor, and served as a volunteer firefighter. First elected State Treasurer in 2014, Frerichs was sworn in for the third time in January 2023. He runs an office that manages over $52 billion, with oversight for multiple state savings programs.

This piece was featured in the January 26, 2023, edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here