Delaware launches state-run retirement program for employers without a 401(k)
As of July 1, participation in Delaware EARNS is required by law for all employers, with five or more employees, who do not offer a qualified retirement plan.
Delaware Expanding Access for Retirement and Necessary Savings (EARNS), the state-run retirement plan that provides coverage for private-sector employees whose employers do not have a plan, launched July 1. Seventeen states in the U.S. now administer an auto-IRA program for private sector employees.
Employer participation in Delaware EARNS is required by law for those who do not offer a qualified retirement plan. Delaware EARNS, which already has about 12 employers enrolled as part of a pilot program, is a new state-run retirement savings program to help bridge the state’s retirement savings gap.
For employers, there is no cost for facilitating the EARNS program and no plan-sponsor liability. Employers can be exempt if they offer a qualified retirement plan, have fewer than five employees, or have been in business less than six months. It’s anticipated that 3,900 employers will be enrolled in the program, according to Pew Charitable Trust.
“Since I came into office, I’ve been committed to improving the financial empowerment and resilience of all Delawareans, especially historically underserved populations. Delaware EARNS gives us a path to do just that: Advance empowerment and resilience for workers throughout our state,” said Treasurer Colleen C. Davis. “This innovative program also benefits our small businesses by allowing them to give employees access to retirement savings at no cost to employers.”
“We anticipate the success of [EARNS] to continue now that it is available to all eligible Delaware businesses…,” said Douglas Magnolia, President of Vestwell State Savings. Vestwell is also program administrator for Colorado, Maine, and Vermont, providing recordkeeping, custodial services and customer support to participating employers and employees.
These four states are collaborating through the Partnership for a Dignified Retirement, an interstate consortium that shares best practices and offers economies of scale to state-sponsored IRA programs.
“There’s a monumental shift happening in the retirement industry,” says Aaron Schumm, founder and CEO of Vestwell. “We’re seeing more and more states playing a central role in closing the retirement savings gap across the country.”
Related: Rhode Island joins the ranks of states with auto-IRAs for small employers
State-mandated retirement savings programs have continued to gain momentum and bridge the gap for many small businesses struggling to afford administrative burdens. Since 2012, every state except Alabama has either enacted or introduced legislation that would establish state-facilitated retirement savings programs.
Experts expect more states to implement auto-IRAs as employers and workers better understand the benefits.
The Delaware Office of the State Treasurer is hosting a free webinar for employers to learn more about the EARNS program on July 17. For more information, visit EARNSDelaware.com.