The Delaware EARNS (Expanding Access for Retirement and Necessary Savings) program is a state-mandated retirement savings initiative aimed at increasing access to retirement plans for workers in Delaware. This article provides Delaware employers with crucial information about the program, including its requirements, deadlines, applicability, and potential penalties for non-compliance.

 

The program was established to ensure that more employees have access to retirement savings plans. It targets workers who do not have access to employer-sponsored retirement plans, providing them with an easy and automatic way to save for their future.

 

Key Features of the Delaware EARNS Program

• Automatic Enrollment: Employees are automatically enrolled in the program unless they opt out.
• Payroll Deductions: Contributions are made through payroll deductions.
• Portability: The retirement account is portable, meaning employees can take it with them if they change jobs.
• Low Administrative Burden: The program is designed to minimize the administrative burden on employers.

 

Employer Responsibilities

 

Who Must Participate?

The Delaware EARNS program applies to most employers in the state, with certain exemptions. Employers with five or more employees who do not already offer a retirement savings plan are required to participate. This includes:

• Private-sector employers
• Non-profit organizations

Employers are exempt from participating if they:

• Already offer a qualified retirement plan (e.g., 401(k), 403(b))
• Have fewer than five employees
• Are governmental entities

 

Clarification on Retirement Plans

To be exempt, an employer must have an official retirement plan within their organization. Simply giving employees money to put into an IRA does not qualify as a retirement plan. The program essentially functions as a Roth IRA, allowing employees to withdraw funds at any time, though the intent is to encourage long-term savings.

 

Implementation Deadlines

Delaware EARNS is set to launch on July 1, 2024. The program deadlines for businesses are based on company size. Employers must register or certify their exemption from the EARNS requirement by October 15, 2024. Exemptions apply to those offering a qualified retirement plan, having fewer than five employees, or having been in business for less than six months.

 

Employers must adhere to these deadlines to comply with the Delaware EARNS program:

1. Initial Registration: Employers must register with the Delaware EARNS program by the specified date based on their company size. By October 15, 2024, employers need to either show they are exempt or complete the registration.
2. Employee Enrollment: After registration, employers must begin enrolling employees in the program.
3. Contribution Start Date: Once employees are enrolled, payroll deductions for contributions must start by the deadline provided during the registration process.

 

Steps for Employers to Comply

1. Register for the Program: Employers must first register with the Delaware EARNS program. This involves providing basic information about the business and its workforce.
2. Notify Employees: Employers must inform employees about the program, including their right to opt out and the benefits of participation. Employees are automatically enrolled unless they choose to opt out.
3. Set Up Payroll Deductions: Employers need to coordinate with their payroll provider to set up the necessary deductions for employee contributions to the Delaware EARNS accounts. If employees do not specify their contribution rate, it defaults to 5% of their pay, which may adjust for inflation over time.
4. Maintain Compliance: Employers must ensure ongoing compliance by regularly updating employee information and facilitating the payroll deduction process.

 

Penalties for Non-Compliance

Employers who fail to comply with the Delaware EARNS program requirements may face penalties. Non-compliance can result in:

• Fines: Financial penalties may be imposed for failing to register, enroll employees, or facilitate payroll deductions by the specified deadlines.
• Legal Action: Continued non-compliance could lead to legal action taken by the state, potentially resulting in further financial and operational consequences.
• Reputation Damage: Non-compliance can harm an employer's reputation, affecting employee trust and potentially impacting business operations.

 

Benefits of the Delaware EARNS Program

• For Employees: Provides a simple, automatic way to save for retirement, promoting financial security. Contributions to the Roth IRA are made with after-tax dollars, meaning withdrawals in retirement are generally tax-free.
• For Employers: Offers a state-facilitated retirement plan with minimal administrative responsibilities, helping to attract and retain employees.
• For the State: Encourages higher savings rates and reduces future dependency on social safety nets.

 

The Delaware EARNS program represents a significant step forward in expanding access to retirement savings for workers across the state. By understanding their responsibilities, adhering to the implementation deadlines, and avoiding potential penalties, employers can ensure they are compliant while providing valuable benefits to their employees. For more detailed information and updates, employers should regularly consult the official Delaware EARNS website (https://earnsdelaware.com/) or contact program representatives.

 

More information can also be found on either of these episodes of Accounting and Accountability: Episode 66, featuring Delaware Treasurer Colleen Davis or Episode 91.