SPRINGFIELD, Ill. (AP) -- A new state program will automatically deduct money from the paychecks of about 1.2 million Illinois residents for retirement savings.
The move could reduce the use of food stamps, Medicaid and other publicly funded social programs, said Illinois Treasurer Michael Frerichs. Illinois Secure Choice is being phased in more than three years after becoming law, The Daily Herald reported.
The state-sponsored retirement program works with certain businesses with 25 or more employees. The businesses will be connected with a financial firm that will provide ways for workers to build retirement savings with after-tax cash deducted from each paycheck for a Roth individual retirement account.
Workers will be eligible for automatic enrollment, 5 percent of gross pay being deducted and placed in a retirement fund. Enrollees will be able to switch savings rates and retirement funds or can opt out of the program.
The U.S. Chamber of Commerce opposes it, calling it a "poor substitute" for typical employer-provided retirement plans.
Eight businesses have volunteered to be in the Secure Choice pilot program, Frerichs said. All companies with 25 or more workers must be part of the program or contract directly with firms that handle employee retirement accounts by November 2019.
Illinois is the second state in the U.S. to participate in such an initiative.