The Illinois Department of Employment Security (IDES) has announced a change that will affect how employers report certain retirement contributions for unemployment insurance purposes.

Starting July 1, 2026, employer contributions to an employee’s 401(k) plan will no longer be considered “wages” under the Illinois Unemployment Insurance Act. As a result, employer contributions to an employee’s 401(k) plan made after June 30, 2026 should not be included when reporting wages to IDES.

What Is Changing?

Under current Illinois rules, employer contributions to a 401(k) plan are included as wages for unemployment insurance reporting. Starting July 1, 2026:

  • Employer 401(k) contributions will be excluded from wages
  • Employee 401(k) contributions will still be considered wages

This change only applies to employer contributions made on or after July 1, 2026. Any employer contributions made before that date should still be reported as wages under the current rules.

This update applies only to employer contributions to 401(k) plans. It does not apply to other types of benefit plans or compensation.

What Does This Mean for Employers?

If your business offers a 401(k) plan, this change may impact how you report wages for Illinois unemployment insurance.

Starting in July 2026, you will need to:

  • Exclude employer 401(k) contributions from reported wages
  • Continue including employee contributions as part of wages
  • Ensure your payroll system is updated to reflect this change

For more information, please visit the Illinois Administrative Code.

If you have questions about how this change may affect your business or need help updating your payroll reporting, please reach out to your local Kemper office.