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Delaware Joins the State Auto-IRA Push


The First State has now entered the push to provide its private sector workers who do not have access to an employer-sponsored retirement plan with access to a state-facilitated retirement plan. 

The legislation (HB 205), which was spearheaded by State Treasurer Colleen Davis and introduced May 20 by State Representative Larry Lambert (D-Claymont) in the Delaware House of Representatives, would establish the Delaware Expanding Access for Retirement and Necessary Savings (EARNS) program. 

In general, HB 205 would require private-sector businesses with five or more employees that have been in business in the state for at least six months in the preceding calendar year and do not currently offer employees access to a tax-favored retirement plan to participate in the automatic payroll deduction IRA program. Employees could opt out of participation. 

According to a release by Davis’ office, the EARNS program was designed to serve small businesses that are unable to offer retirement plans to employees due to the cost and administrative burden. This, according to the release, would include more than 200,000 Delaware workers who currently lack access to an employer-sponsored program or 52% of the state’s workforce who do not have an easy way to save for retirement at work. 

Additionally, Davis notes that the program is designed to serve as a public-private partnership and does not seek to replace, or compete with, employer-sponsored retirement plans.

“With no additional cost and just a few extra steps, small businesses in Delaware will be able to provide one of the most valuable benefits to their employees,” says Davis. “Workers benefit immediately by being automatically included in a retirement plan. Programs like Delaware EARNS that use auto-enrollment have a 92% participant rate compared to 61% for plans with just a voluntary rate.”

Board Oversight

The Act also creates a seven-person board to oversee initial design and implementation of the program, including rules and regulations governing:

  • employee eligibility and covered employer status;
  • enrollment and re-enrollment processes;
  • the methods by which covered employees or participants may make elections or opt out of participation; and
  • contribution limits, the initial automatic default contribution rate, the automatic annual default escalation rate and the maximum default contribution rate.

The legislation specifies that the automatic default contribution rate shall not be less than 3% or more than 6% of compensation. The board also would be given discretion to implement an auto-escalation feature based on years of participation that would be either 1% or 2% of compensation and shall not occur more than annually. In addition, the maximum default contribution rate shall not exceed 15%.

The board would also adopt an investment policy statement and select investment options, including default investment options, consistent with the objectives of the program.

After initial implementation of the program, with a goal of having covered employees participating and making contributions by Jan. 1, 2025, the board would be disbanded no later than Dec. 31, 2025, at which point all duties and functions of the board will be transferred to and assumed by the Plans Management Board, which currently oversees the investment programs for state employees. 

The legislation has been referred to the Delaware House Labor committee. A committee hearing on the legislation could take place within the next two weeks. 

“Until now, Delaware was one of just five states that has neither taken any action to create, nor explored the feasibility of, such a program,” Davis notes. “Enacting Delaware EARNS will enable more people to save for retirement, reduce the need for additional taxes to fund public assistance programs, and even incentivize people to return to the workforce knowing a retirement plan will be available.”

According to data by the Georgetown University Center for Retirement Initiatives, there are now 13 states and two cities that have adopted some form of a retirement savings programs for private sector workers, and nearly 20 more that are considering legislation or are studying the issue.