Delaware EARNS State-Sponsored Retirement Plan

Delaware EARNS state-sponsored retirement plan offers a savings opportunity for private-sector workers in Delaware without a retirement plan. Find out how it works
Author: Penelope Team
Delaware EARNS State-Sponsored Retirement Plan

What is the Delaware EARNS retirement plan mandate?

The Delaware EARNS retirement plan mandate is a state-sponsored initiative designed to help private-sector workers who lack access to employer-sponsored retirement plans.

The program, known as DE Earns, mandates small businesses with five or more employees that don't already offer a retirement plan enroll their workers in a low-cost, state-facilitated auto IRA program.

This retirement program aims to bridge the wealth gap by enabling more Delaware residents to save for retirement, enhancing financial security for the future.

What Type of Plan Is Delaware EARNS?

Delaware EARNS is structured as a state-facilitated auto IRA (Individual Retirement Account) program. It is designed to provide a low-cost retirement savings option for workers at small businesses that do not offer their own retirement plans.

This program mandates automatic enrollment to ensure that eligible employees have the opportunity to save for their retirement unless they opt-out.

When Can a Business Enroll in DE EARNS?

Businesses in Delaware can start enrolling in the DE EARNS program according to a phased implementation schedule set by the state. The specific start dates for enrollment may vary, and it's structured to gradually incorporate different sized businesses over a designated period.

The State Treasurer’s Office’s initiative will take effect on July 1, 2024, for companies with at least five employees.

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Who Is Eligible

Eligibility for enrollment in the DE EARNS program extends to any Delaware private-sector employer that does not offer a qualified retirement plan and has five or more employees.

These employees must be automatically enrolled in the program unless they choose to opt-out. This initiative aims to include a broad range of workers and businesses, particularly focusing on those who have traditionally lacked access to employer-sponsored retirement savings plans.

What to Expect from Delaware EARNS?

Delaware employers who meet specific criteria are required to enroll in the EARNS program. This includes private businesses operating for at least six months, with five or more employees, and lacking a qualifying retirement plan.

Responsibilities for these employers include registering the business with EARNS, facilitating employee participation, providing necessary program information, and handling employee contributions.

The program is designed to minimize employer costs and administrative burdens, emphasizing simplicity and ease.

Deadlines for employer participation will be staggered based on company size, giving smaller employers more time to comply. Workers can opt-out at any time, but by default, they are enrolled with a starting contribution rate of 5%, which escalates 1% annually. 

DE EARNS participants can change their contribution rate at any time, from as little as 1% to as much as 100% within the IRS limits. In 2024, the contribution limit is $7,000 and $8,000 for people over 50. 

EARNS charges employees an annual asset-based fee of approximately 0.15%, meaning participants pay approximately $0.15 for every $100 in their account. In addition, participants pay an account fee of $5.50 each quarter ($22 annually) and a $1 state fee each quarter ($4 annually).

According to EARNS, these fees pay for the program’s administration and the operating expenses charged by the underlying investment funds in which the program’s portfolios are invested.

Delaware EARNS offers a straightforward approach to retirement savings for businesses that don't provide their own plans. 

Of course, businesses could explore alternative retirement plans like 401(k)s, which offer more flexibility in terms of employer contributions and investment options as well as fewer employee fees. If you are interested in a 401(k) retirement plan, speak to our retirement specialists here at Penelope.

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