We are pleased to announce a Memorandum of Understanding (the Memorandum) with the Office of the Illinois State Treasurer (the Treasurer) providing relief to ERIC members from reporting obligations that otherwise apply under the Illinois Secure Choice Retirement Savings Program (Secure Choice).
As described below, this Memorandum allows ERIC members to avoid any penalties or non-enforcement action under Secure Choice without having to file any report with the Treasurer. Building on the success of our settlement agreement with Oregon, we achieved this result without having to file a complaint. We are hopeful that other states that impose automatic enrollment IRA programs will see the Memorandum as a viable alternative to imposing reporting obligations.
The Memorandum, while substantially similar to our settlement agreement with Oregon, allows ERIC members to qualify for relief prior to being contacted by Secure Choice about non-compliance. As described further below, an ERIC member will be exempt by having ERIC communicate on its behalf to the Treasurer that it is an ERIC member.
Below is a summary of the key points of the Memorandum.
1. What relief is provided under the Memorandum?
The Memorandum provides that a qualifying ERIC member is not required to make any filings with the Treasurer in order to be exempt from the requirement to enroll its Illinois-based employees in Secure Choice.
2. How can an ERIC member qualify for relief under the Memorandum?
An ERIC member can qualify for relief under the Memorandum by either
(1) authorizing ERIC to transmit to the Treasurer (a) the employer identification numbers (EINs) of the plan sponsor and each member of its controlled group that has one or more Illinois-based employees participating in an ERISA-covered retirement plan, and (b) a confirmation of ERIC membership OR (2) if your organization receives an inquiry from the Treasurer or Secure Choice, simply notifying the Treasurer in writing that your organization is an ERIC member. The Treasurer will then contact ERIC, which will then confirm member status and inform your organization that it has done so.
3. What if neither action above is taken by a company?
An ERIC member which fails to take either action described above is subject to an enforcement action by the Treasurer. Therefore, ERIC suggests that its members either take action proactively to provide ERIC with the plan sponsors EIN or, upon contact by the Treasurer or Secure Choice, indicate that the organization is an ERIC member.
4. I understand that an Illinois tax form – IL Form-941 – includes a question regarding retirement plan coverage. Does this Memorandum address IL Form-941?
ERIC members that follow either of the steps described above do not need to check Box C on IL Form 941.
5. Is the Memorandum permanent?
ERIC may elect to withdraw from the Memorandum by providing ninety days’ advance written notice if the Treasurer breaches its obligations under the Memorandum (such as by pursuing an enforcement action for a reporting failure against a Precleared Entity or Designated Entity). This withdrawal right preserves ERIC’s rights to seek a judicial order that any reporting requirement under state law is preempted by ERISA. In addition, the Memorandum may become moot if any revision to the IRS Form 5500 requires disclosure of the employer identification numbers (EINs) of the plan sponsor and each member of its controlled group (as described above).
If you have any questions, please do not hesitate to contact me.
Article by Aliya Robinson, Senior Vice President of Retirement Policy