A test program the state treasurer is promoting could increase the rate at which Illinoisans save for retirement.
About a third of Americans in retirement are living near poverty because they are subsisting on Social Security alone and have not saved their own assets or lack a work-related pension, according to State Treasurer Michael Frerichs.
Frerichs estimated the Secure Choice program will be able to help about 1.2 million people invest their own money for retirement.
“We’re making it easier for them to do something they know they already need to do,” Frerichs said on GLT’s Sound Ideas. “I think that working in a way to help people save their own money, to build up a bit of a nest egg, is in the best interest of everyone in the state.”
Secure Choice requires many employers who do not already offer a retirement savings program to provide a Roth IRA option that allows employees to take out money from their paycheck after taxes and put it money in an investment account. Contributions and investment returns in the account can be withdrawn tax-free after retirement.
“This is for over half of the employers out there in the state who don’t currently offer workplace retirement savings option,” Frerichs said.
The state will require employers to offer this program if they have at least 25 employees, have been doing business in the state for two years or longer, and do not already offer a workplace retirement program.
“We have signed up employers in different parts of the state in different industries and different sizes, trying to work through these issues now, so then when it rolls out, it will be flawless,” Frerichs said.
Illinois is currently testing out the program throughout the state. It will be officially rolled out into phases between this fall and next fall.
Money and Medical Marijuana
While Illinois is enrolling employers into the new program, Frerichs is on another mission—finding ways for medical marijuana businesses to bank.
Marijuana, even medical marijuana, remains illegal under federal law. The industry began to grow as Illinois and other states authorized it. The Obama administration issued the so-called Cole memo in 2013. That document made it clear that banks working with legitimate and legal businesses within a state would not be prosecuted or lose their charter.
Attorney General Jeff Sessions has revoked the memo, and Frerichs said banks are now opting out of being part of the cannabis business.
“Now there’s great uncertainty and some banks, including the Bank of Springfield, have announced they’re pulling out of this market, leaving some of these legitimate businesses without a banking option,” Frerichs said.
Frerichs said the Bank of Springfield served about 70 percent of the medical marijuana business in Illinois.
“We are in charge of collecting taxes and fees for legitimate businesses here in the state of Illinois like medical cannabis dispensaries or cultivators,” Frerichs said. “But if they don’t have access to banking services, these entrepreneurs who invested money had to pay us in duffel bags full of cash.”
Sessions multiple letters regarding finding a solution for entrepreneurs and the banking industry. He has yet to receive an answer.
Sessions has been clear about his opposition to marijuana. Frerichs said he is also trying to find new banks to prevent the medical marijuana industry in Illinois from remaining largely cash only.