By: Paige Moricz, PHR
Key Takeaways:
- The Paid Leave for All Workers Act will entitle Illinois employees to take up to 40 hours of paid leave for any reason during a 12-month period, with accrual at the rate of one hour per 40 hours worked.
- The state minimum wage increases to $14 per hour, with Chicago maintaining a higher hourly rate.
- The Transportation Benefits Program Act applies to certain employers located within 38 counties and townships, requiring them to provide a commuter benefit in the form of pre-tax salary reductions to reimburse transit pass expenses.
- The SECURE Act 2.0 enables part-time employees who have worked at least 500 hours in each of three consecutive years to participate in the deferral-only portion of their employer’s 401(k) plan.
The workplace will look different for employers and workers alike in Illinois after January 1, 2024, when several new state laws take effect, boosting wages, adding transportation benefits for certain workers and enabling all workers to take time off for any reason.
Additionally, provisions of the federal Setting Every Community Up For Retirement Enhancement (SECURE) Act 2.0, a 2022 law that seeks to broaden participation in workplace retirement plans, also will take effect in 2025, guaranteeing the right of certain part-time workers to participate in their employers’ 401(k) retirement plans.
Collectively, the state laws and federal law expand workers pay and benefits in ways that policymakers believe will yield long-term improvements for the state and the nation. Expanded transportation benefits are aimed at encouraging commuters to use mass transit; enabling workers to take time off when needed can help curtail the spread of illness in the workplace, and expanding workers’ access to retirement plans may encourage more Americans to save money for their retirement years.
The Specifics
Paid Leave for All Workers Act
Illinois’ Paid Leave for All Workers Act will require employers to provide paid leave to most workers for any reason. The act includes the following key provisions:
- Employees working in Illinois are entitled to earn and use at least 40 hours of paid leave for any reason during a 12-month period. Employees must accrue paid leave at a rate of no less than one hour for every 40 hours worked.
- Exempt employees are deemed to work 40 hours a week for paid leave accrual purposes unless their regular workweek is less than 40 hours (in which case paid leave must accrue based on their regular workweek).
- Alternatively, employers may choose to front load their employees’ paid leave instead of tracking accruals.
- If an employer chooses to front load paid leave, they may adopt a use-it-or-lose-it policy in which the employee must use all paid leave prior to the end of the benefit year or forfeit unused leave. Otherwise, paid leave must carry over year to year.
- While on paid leave, employees must be paid their regular hourly rate of pay.
- Employees are entitled as of January 1, 2023 (the effective date of the law) or 90 days after the commencement of employment.
- Employers are not required to pay out unused paid leave upon an employee’s separation.
Increased Minimum Wage
The Illinois state minimum wage increases to $14 per hour. The minimum wage in Chicago remains at $15.80 per hour for employers with 20 or more workers and $15 per hour for employers with 4 to 19 employees.
Mass Transit Benefits
The Illinois Transportation Benefits Program Act applies to employers that are located in 38 specific counties and townships, and that employ 50 or more full-time employees at an address within one mile of a fixed-route transit service run by the Regional Transportation Authority (RTA).
Specifically, the act applies to employers in the following locations:
- Cook County
- Warren Township in Lake County
- Grant Township in Lake County
- Frankfort Township in Will County
- Wheatland Township in Will County
- Addison Township
- Bloomingdale Township
- York Township
- Milton Township
- Winfield Township
- Downers Grove Township
- Lisle Township
- Naperville Township
- Dundee Township
- Elgin Township
- St. Charles Township
- Geneva Township
- Batavia Township
- Aurora Township
- Zion Township
- Benton Township
- Waukegan Township
- Avon Township
- Libertyville Township
- Shields Township
- Vernon Township
- West Deerfield Township
- Deerfield Township
- McHenry Township
- Nunda Township
- Algonquin Township
- DuPage Township
- Homer Township
- Lockport Township
- Plainfield Township
- New Lenox Township
- Joliet Township
- Troy Township
The act requires employers to provide a commuter benefit to full-time employees that allows workers to elect pre-tax salary reductions to be used to reimburse transit pass expenses. “Transit pass” is defined as tokens, fare cards and vouchers entitling a person to transportation on a system operated by or within the purview of the RTA or the Chicago Transit Authority. Employers are not required by the state law to make any contributions to employees for commuter benefits, but they are allowed to do so under federal tax laws. The maximum transportation benefit per month in 2023 is $300, but this will be adjusted for inflation annually.
Part-time Workers Eligibility for 401(k) Participation
On the federal level, the SECURE Act 2.0 will require employers to offer 401(k) benefits to long-term, part-time employees for plan years beginning January 1, 2023 or later. This benefit entitles part-time employees who have worked at least 500 hours in each of three consecutive years to participate in the deferral-only portion of a 401(k) plan. This means any employee hired in 2021 will be eligible to defer salary to the 401(k) plan in 2024 on their anniversary date, so long as they meet the minimum eligibility requirements.
Besides working a minimum of 500 hours per year, part-time employees must be at least age 21 at the time of eligibility.
We recommend that employers ensure that proper employment records are being kept to track eligibility of all part-time employees.
If you have questions about how these and other employment laws affect your business and your employees, contact your KRD advisor.
