Delaware EARNS is a state-mandated retirement program for DE employers who do not offer a qualified retirement plan and have more than five employees. The program is designed to address the nearly 150,000 Delaware workers who do not have access to a retirement plan through their employer.
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Key takeaways about Delaware EARNS
- Delaware businesses have until October 15, 2024, to register or certify their exemption
- The program is mandated for any employer that has been in operation for at least six months and employs five or more people
- Self-employed individuals can participate in Delaware EARNS
What if you are a Delaware employer who is learning about this state-sponsored plan for the first time? In this guide, we will explain what Delaware EARNS is, how it helps employees save, whether there are any exemptions, and what businesses need to do to stay compliant.
What is Delaware EARNS?
How did this savings plan come about? In 2022, the Delaware state legislature voted to create the Delaware Expanding Access for Retirement and Necessary Savings (Delaware EARNS) program, in partnership with the Colorado SecureSavings, an interstate consortium of state-run retirement programs. House Bill 205 was signed by Delaware Governor John Carney on August 18, 2022, and the program officially launched on July 1, 2024.
Does Delaware EARNS affect all employers?
In a nutshell, this is a state-mandated retirement program for all Delaware employers who do not have a qualified retirement program in place, and employ five or more people. What types of plans are we referring to? This means if an eligible employer does not offer their employees access to one of the following programs, they are required to offer access to Delaware EARNS.
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For those keeping score, businesses with fewer than five employees, or those that have been in business for less than six months, are exempt from the program, although they have the option to voluntarily participate. We should point out that for businesses looking to attract top talent — or just retain their top performers — retirement benefits tend to rise to the top of most employee wish lists and can help with recruiting efforts.
Though the program began on July 1, 2024, employers have until October 15, 2024, to register or certify that they are exempt from participating. To ensure that the program was ready, in May 2024, twelve Delaware employers participated in a successful pilot program prior to the Delaware EARNS statewide launch.
Next, let’s look at why savings plans like Delaware’s are becoming more common.
Why are state-mandated programs becoming popular?
The Pew Charitable Trust estimates that nearly 56 million private sector workers don’t have access to a retirement plan through their place of employment. In addition, more than 61% of Americans are currently concerned that they’ll run out of money during retirement. Closer to home, nearly 40% of Delaware workers do not have access to a retirement plan.
It isn’t just workers who pay the price. When retirement benefits are insufficient, taxpayers are often on the hook to fund the increase in public assistance necessary at both the state and federal levels.
In response, states are beginning to take matters into their own hands, by passing legislation adopting automated savings programs. More than a dozen states currently offer some form of retirement savings option, which auto-enrolls employees in a self-funded Roth IRA. Delaware EARNS, which launched on July 1, 2024, is the latest state to follow this trend.
Explaining how Delaware EARNS works
How does an employer get the ball rolling? Employers need to visit the Delaware EARNS website, register their business, or certify their exemption from participating. Employees and self-employed individuals can visit the website to manage their account or opt out of participating.
Once a business is registered, employees will automatically be enrolled in the program. Employees who wish to participate don’t have to lift a finger and have the default savings amount of 5% deducted from their gross salary. What if workers want to make a change or cut ties with the plan?
Each employee will have:
- Option to customize their accounts to change the savings rate
- Entirely opt out of the program — if they choose to
- If employees have a change of heart, they have the choice to opt back into EARNS at a later date
What are the costs associated with Delaware EARNS?
For employers with their eye on the bottom line, Delaware EARNS is free to employers and does not permit any matching contributions. In addition, employers have no fiduciary responsibility to the plan because the management — including contribution levels — is left up to the employee. That said, there are some fees that staffers should be aware of.
- Employees participating in the program will pay an annual asset-based account fee of 0.32%, which equates to $0.32 for every $100 in their account
- Employees are also responsible for paying an annual fee of $22 and an annual state fee of $4, with both charged quarterly
What type of retirement savings plan is Delaware EARNS?
Any employee participating in Delaware EARNS will be enrolled in a self-managed Roth IRA, which follows all established Roth IRA rules and regulations. As a self-managed IRA, employees are able to self-direct the account to best suit their needs, including choosing the contribution level, selecting investment options, and abiding by established contribution limits.
Delaware EARNS upcoming deadlines
Earlier in the article we touched on some dates, but here is the critical information employees will want to know if they fall into the plan’s guidelines.
- Delaware EARNS launched on July 1, 2024
- Employers have until October 15, 2024, to register their business or certify their exemption
- Any business with five or more employees must register or certify before the deadline
Are there potential penalties for ignoring Delaware EARNS?
Employers who ignore the mandate may face some less-than-ideal outcomes.
- Initially, any employer who ignores the requirements will receive a notice outlining the nature of the non-compliance
- The next step for employers who are not in compliance with the Act within 90 days of the notice date is for the board to initiate enforcement proceedings
- If the business remains non-compliant, the board may impose an administrative penalty of up to $250 per eligible employee per year, with a maximum penalty of $5,000 per year
More resources for employers about Delaware EARNS
For more information on Delaware EARNS, be sure to take a look at these additional resources.
- Program description
- Legislation
- Colorado and Delaware Announce Partnership
- Employee help information
- Employer FAQs
- Employer fact sheet
Delaware EARNS provides retirement security for workers
Delaware EARNS gives state workers the option to save for their retirement, regardless of whether their current employer offers a retirement plan, or even if they’re self-employed. But employers also benefit from this new state mandated program. It allows them to offer a no-cost way for their employees to participate in a retirement plan, without the responsibility of managing a plan.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.