DELAWARE EARNS – Retirement Savings Program
DELAWARE EARNS – State Mandated Retirement Savings Program
Effective July 1, 2024, any Delaware employer with five or more employees is required to enroll in Delaware’s new retirement savings program called “Delaware Earns” (Expanding Access for Retirement and Necessary Savings). The program is not a retirement plan as defined by IRS standards but more of an IRA contribution for employees through payroll deductions.
Five or more employees is “loosely” defined. According to Delaware Earns, if you employ five different individuals throughout the course of the tax year, you are deemed to have five employees and therefore subject to this new requirement. Stated differently, if you issue five W2s at year end, you are subject to the new requirement. All employers with five or more employees must enroll. However, if any employer already has a qualified retirement such as a 401K, Simple IRA, or other qualified retirement plan, they may file for an exemption. Employers with less than five employees are not required to register.
Key Program Highlights:
- No cost to the employer.
- Employers are not allowed to make matching contributions on behalf of employees.
- Employees are automatically enrolled in the program using a 5% deferral rate but are allowed to lower their deferral rate to as low as 1% or opt out entirely.
- The program utilizes a ROTH IRA type account by default.
- Maximum Employee deferral for 2024 is $7,000 with an additional $1,000 catchup contribution allowed if they are over age 50.
- Employers must register by October 15, 2024.
We have summarized the necessary steps based on your business’s individual circumstances:
- If your business has four or fewer employees:
- We recommend calling 855-934-3701 to confirm your exemption in their system.
- If your business has five or more employees and you have a qualified retirement plan already in place:
- We recommend calling 855-934-3701 to confirm your exemption in their system or;
- If you received an access code, you can login on the website to confirm your exemption.
- If your business has five or more employees and you do NOT have a qualified retirement plan in place:
- You need to register your business with Delaware Earns by October 15, 2024. We recommend starting this process right away.
- You will need your access code to do this. If you have not been provided with an access code, you can look up your access code on earnsdelaware.com
- You will need to enter your payroll information, company bank information, and employee information.
- Employees will receive communication from Delaware Earns giving them 30 days to opt out. If they do not opt out, the employer will start withholding contributions on their behalf.
- You will need to administer the program as part of normal payroll – Details are available on earnsdelaware.com
The above summary is designed to give you a quick, easy to read, general understanding of this new state-mandated initiative. We recommend that you start this process sooner, rather than later, as many employers have experienced difficulty and delays in obtaining their access codes. Employers who fail to comply with the mandate may face penalties. We encourage you to visit earnsdelaware.com for additional information.
Quick Links:
Delaware Earns – Employer Fact Sheet
Delaware Earns – How to setup your EARNS Employer Account