Delaware joins Colorado-led state retirement savings program

The DE EARNs retirement plan will join an consortium of states in running a retirement program for private-sector employees. | DBT PHOTO BY JACOB OWENS

DOVER — Delaware has opted to join Colorado’s interstate consortium of state-run retirement savings programs, bringing the First State the ability to bring a state-run retirement program online faster than originally planned.

The state and Colorado announced the partnership on Monday, marking Delaware the second to join the “Partnership for a Dignified Retirement” after Maine. In 2022, the Delaware legislature voted to create Delaware Expanding Access for Retirement and Necessary Saving program, or DE EARNS, to create a state-sponsored savings plan that will be funded by employees.

The Delaware EARNS Program Board voted to join the Colorado SecureSavings Program to offer a retirement program, with each plan tied to an employee instead of a workplace. Vestwell, in partnership with BNY Mellon, serves as the program administrator, providing recordkeeping, custodial, and administrative services to employers and employees in participating partner states.

State Treasurer Colleen Davis has heralded the DE EARNS program as a way to close the gap on retirement for Delaware families. | DBT PHOTO BY JACOB OWENS

Delaware State Treasurer Colleen C. Davis has said that between 150,000 and 200,000 workers in the state were not offered a retirement plan through their workplace. Many of those workers are low to middle income earners.

“Today, we took a major step toward closing that gap,” Davis said in a statement. “We are grateful to the EARNS Program Board for supporting our entry into this innovative consortium with Colorado and Maine. Doing so will ensure that Delawareans have the highest quality choice when it comes to retirement savings.”

The Delaware state office of the AARP found that residents age 45 and older are 15 times more likely to save through their work using payroll deductions. In part because of a lack of employer-sponsored plans, however, the average working-age household only has $2,500 saved for retirement, and near-retirement households only have $14,500. That leads many to rely upon Social Security in their retirement.

The DE EARNS program requires employers with five or more employees to make the program available to their workers if they do not have a similar retirement plan themselves. The state-sponsored plan — which is still funded by employees and facilitated by employers — is structured as an automatic payroll deduction into an individual retirement account.

Colorado was a pioneer in the state-sponsored retirement program arena, as it developed a framework for less populated states to have an option for retirement programs. Launched earlier this year, the Colorado SecureSavings Program is also designed as an automatic individual retirement account that requires employers with five or more employees to register. 

The Colorado SecureSavings Program now has 124,000 accounts and 13,000 registered employers.

“The Delaware EARNS Program Board was pleased to support this historic interstate collaboration to bring a much-needed retirement savings vehicle to Delaware workers,” DE EARNS Board Chair Fayetta Blake said in a statement. “Through joining this interstate effort, we’ll greatly accelerate the launch of the EARNS program. Not only will we save start-up time and costs, but we’ll also allow Delaware participants to benefit from economies of scale that will help them grow their savings over time.”

State-backed retirement programs have risen in prominence in the last couple of years, as the COVID pandemic pushed thousands of people out of work in the first months of the global health crisis that forced social distancing and hard financial choices. Investment firm Vanguard Group told CNBC that its data showed that 6% of investors  —  or 268,000 people —withdrew up to $100,000 from their retirement accounts in 2020. Less than 1% had paid it back by 2021.

Roughly 10 states have mandated retirement plans at various stages, either active or in the process of development.

“This is an important step toward expanding sustainable and dignified retirement options across the nation. We appreciate the vote of confidence from the Delaware EARNS Board, and we are looking forward to working closely with Treasurer Colleen Davis and her team,” Colorado State Treasurer Dave Young added in a statement.