Automatic Enrollment Implementation
Is automatic enrollment permissible under law?
Partially
Explanation:
The state retirement system is allowed to automatically enroll its participants. For all other plans, Illinois permits wage deductions without the employee’s written consent only if required by law or if the deduction is to “the benefit of the employee.” Automatic enrollment in supplemental defined contribution plans other than the state plan is not permitted under this law.
Relevant State Laws – 40 ILCS 5 § 24-105.2, 16-204; 820 Ill. Comp. Stat. Ann. § 115/9
“Automatic enrollment for certain members. The Department of Central Management Services shall automatically enroll in the State Employees Deferred Compensation Plan any employee who, on or after 6 months after the effective date of this amendatory Act of the 101st General Assembly, first becomes a member or participant of a retirement system created under Article 2, 14, or 18. An employee automatically enrolled under this Section shall have 3% of his or her pre-tax gross compensation for each compensation period deferred into his or her deferred compensation account. An employee shall have 30 days from the start date of employment to elect to not participate in the deferred compensation plan or to elect to increase or reduce the amount of pre-tax gross compensation deferred. An employee shall be automatically enrolled in the Plan beginning the first day of the pay period following the employee’s thirtieth day of employment. An employee who has been automatically enrolled in the Plan may elect, within 90 days of enrollment, to withdraw from the Plan and receive a refund of amounts deferred. An employee making such an election shall forfeit all employer matching contributions, if any, made prior to the election. Any refunded amount shall be included in the employee’s gross income for the taxable year in which the refund is issued.” 40 ILCS 5/24-105.2
“Optional defined contribution benefit. As soon as practicable after the effective date of this amendatory Act of the 100th General Assembly, the System shall offer a defined contribution benefit to active members of the System. The defined contribution benefit shall be an optional benefit to any member who chooses to participate. The defined contribution benefit shall collect optional employee and optional employer contributions into an account and shall offer investment options to the participant. The benefit under this Section shall be operated in full compliance with any applicable State and federal laws, and the System shall utilize generally accepted practices in creating and maintaining the benefit for the best interest of the participants. The System may use funds from the employee and employer contributions to defray any and all costs of creating and maintaining the benefit. In addition, the System may use funds provided under Section 16-158 of this Code to defray any and all costs of creating and maintaining the benefit and then shall reimburse those costs from funds received from the employee and employer contributions under this Section. All employers must comply with the reporting and administrative functions established by the System and are required to implement the benefits established under this Section. The System shall produce an annual report on the participation in the benefit and shall make the report public.
As soon as is practicable on or after January 1, 2022, the System shall automatically enroll any employee who first becomes an active member or participant in the System. A member automatically enrolled under this Section shall have 3% of his or her pre-tax gross compensation for each compensation period deferred into his or her deferred compensation account, unless the member otherwise instructs the System on forms approved by the System. A member may elect, in a manner provided for by the System, to not participate in the defined contribution benefit or to increase or reduce the amount of pre-tax gross compensation contributed, consistent with State or federal law. A member shall be automatically enrolled in the benefit beginning the first day of the pay period following the member’s 30th day of employment. A member who has been automatically enrolled in the benefit may elect, within 90 days of enrollment, to withdraw from the benefit and receive a refund of amounts deferred, plus or minus any applicable earnings, investment fees, and administrative fees. Any refunded amount shall be included in the member’s gross income for the taxable year in which the refund is issued.
On or after January 1, 2023, the System may elect to increase the automatic annual contributions under this Section. The increase in the rate of contribution, however, shall not exceed 2% of a member’s pre-tax gross compensation per year, and at no time shall any total contribution exceed any contribution limits established by State or federal law.” 40 ILCS 5/16-204
“Employers can make deductions from wages only when certain conditions are met as below:
1) a deduction is required by law;
2) a deduction is to the benefit of the employee;
3) a deduction is made in response to a valid wage assignment or court order; or
4) a deduction is expressly authorized by employees’ written consent.” 820 Ill. Comp. Stat. Ann. 115/9