State treasurer blasts move, vows to work with Legislature to override action
Updated with clarification
Illinois Gov. Bruce Rauner issued an amendatory veto Tuesday making it optional for employers to participate in the state's Secure Choice program.
There now are three possible actions. Legislators could: approve the change; let die the technical changes bill to which Mr. Rauner's action applies; or override the amendatory veto.
The Secure Choice program, which was signed into law in 2015 by then-Gov. Pat Quinn, required that employers that have been in business for at least two years and have 25 or more employees participate in Secure Choice or provide their own retirement savings plan.
Since the program has been implemented, “valid concerns” have been raised about a mandatory program potentially leading to fewer small retirement plans offered by employers, terminations of existing small plans, and concerns about the program's “viability under federal law,” Mr. Rauner wrote in his veto message Tuesday.
"Rigorous economic analysis studying these effects has yet to satisfy concerns about unintended consequences," Mr. Rauner wrote. "Furthermore, federal guidance on the relationship of state programs like this to federal ERISA law has changed since the underlying legislation was passed, and the Illinois Secure Choice program in particular has suffered from delays and poor implementation. While this legislation as passed makes some marginal beneficial changes to the reporting structure of Secure Choice to better monitor its investments and progress, a change that could actually provide some comfort about the uncertainty surrounding the program would be to make it optional for employers to participate in as a retirement option for their employees."
In a news release Wednesday, Illinois Treasurer Michael W. Frerichs called Mr. Rauner's veto "a shameful attempt to try to undermine a bipartisan program and deny private-sector workers the chance at a secure retirement."
"We will work with members of both parties to override this veto and will stay committed to the successful rollout of Secure Choice to give Illinois workers an opportunity to retire with dignity," Mr. Frerichs said.
Mr. Rauner previously signed three other bills that made technical changes to the program and appointed four members of the seven-person board that oversees Secure Choice, the news release from the treasurer's office noted.
The program is expected to be fully launched for employers with 500 or more employees by November. For employers with 25-49 employees and 100-499 employees, the program is expected to be fully launched next year.
Employees who do not opt out of the program are automatically enrolled into target-date funds managed by BlackRock (BLK) at a contribution rate of 5%. Employers do not contribute to the program.
Employees may change their investment options at any time. Along with the target-date funds, the program offers a capital preservation option managed by State Street Global Advisors, and a bond index option and equity index option managed by Charles Schwab.
A spokesman for Mr. Rauner couldn't be reached for comment.