DELAWARE EARNS RETIREMENT PLAN MANDATE: HELP BUSINESS OWNERS BENEFIT

What You Should Know

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    How it Works:

    Employer registration or exemption

    • Employers with five or more W‑2 employees in Delaware that do not offer a qualified retirement plan must register with Delaware EARNS or certify an exemption through the program website. 
    • Employers that already offer a qualified retirement plan are not required to participate but must still certify their exemption.

    2. Automatic employee enrollment

    • Once an employer registers, eligible employees are automatically enrolled in the program.
    • Employees may opt out at any time or re-enroll later without penalty.

    3. Payroll deductions

    • Employee contributions are made through automatic payroll deductions and deposited into an individual Roth IRA in the employee’s name.
    • The default contribution rate is 5 percent of gross pay, unless the employee chooses a different rate or opts out.

    4. Employer role

    • Employers are responsible only for facilitating payroll deductions and remitting contributions.
    • Employers do not contribute to employee accounts and do not have fiduciary responsibility under the program.

    5. Employee control and portability

    • Employees own and control their accounts, select from available investment options, and may change contribution amounts at any time.
    • Accounts are portable, meaning they stay with the employee if they change jobs.

    6. Ongoing compliance

    • Employers must continue facilitating payroll deductions for participating employees and maintain compliance unless they later offer a qualified retirement plan and certify an exemption.
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    Deadlines:

    • Program effective date: July 1, 2024
    • Employer registration or exemption certification deadline: October 15, 2024, for covered employers with five or more employees that do not offer a qualified retirement plan
    • Ongoing requirement: Employers that become newly eligible after launch must register or certify an exemption once notified by the program
    • Penalty enforcement begins: 2026, with fines of $250 per eligible employee, capped at $5,000 per year, for failure to comply.
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    Requirements:

    An employer is required to participate in Delaware EARNS if all of the following apply:

    • The business has been operating for at least six months.
    • The employer has five or more W‑2 employees in Delaware, including full-time and part-time employees.
    • The employer does not offer a qualified employer-sponsored retirement plan, such as a 401(k), 403(b), SEP IRA, or SIMPLE IRA.
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    Penalties:

    • Penalty enforcement begins in 2026 for covered employers that fail to register for the program or certify an exemption as required.
    • Employers may be assessed a penalty of $250 per eligible employee per year for noncompliance.
    • Annual penalties are capped at $5,000 per employer, regardless of the number of eligible employees.

    Important clarifications

    • Penalties apply only to employers, not employees.
    • There is no penalty for employees who opt out of the program.
    • Employers are not required to make employer contributions and are not penalized for employee participation choices.