Legislature passes state-sponsored retirement plan

The Delaware General Assembly approved the creation of a new state-sponsored retirement plan to aid residents without access to an employer-sponsored plan. | DBT PHOTO BY JACOB OWENS

DOVER – The Delaware General Assembly almost unanimously approved a new state-sponsored retirement savings program aimed to help individuals who don’t have access to an employer-sponsored program.

House Bill 205, also known as the Delaware Expanding Access for Retirement and Necessary Saving program, or DE EARNS, creates a state-sponsored savings plan, funded by employees, facilitated by employers, and overseen by the state.

It requires businesses with more than five employees that don’t currently offer a retirement plan to participate through the payroll process. They are not required to provide any kind of matching contribution to participating employees. Participants would benefit through pooling and investing their retirement funds in securities.

The State Senate voted unanimously, with State Sen. Trey Paradee (D-Dover) not voting, to approve the measure that had passed the House of Representatives back in May. Only five House Republicans voted against the bill sponsored by Democratic Rep. Larry Lambert and State Sen. Nicole Poore that now heads to Gov. John Carney.

Prefaced by the fact that a large number of Americans, and Delaware residents, are not adequately saving for their futures, DE EARNS aims to alleviate barriers small employers face in offering options, close the wealth gap among low to modest wage earners and keep Delaware competitive with neighboring states by attracting talented workers to Delaware.

Under HB 205, a DE EARNS program board will be created to oversee the initial design and implementation of the program. It will be disbanded before Dec. 31, 2025, with all duties and functions transferred by the Plans Management Board, which oversees other investment programs under the Office of the State Treasurer. The plan is scheduled to launch Jan. 1, 2025.

“More than half of the state’s workforce lacks an easy way to save through a retirement program at work,” State Treasurer Colleen Davis said in a statement celebrating the bill’s passage. “Not only will Delaware EARNS help those employees save for the future, it also benefits small businesses that may not be able to offer retirement plans to employees due to the cost and administrative burden, allowing them to attract and keep good employees by offering a crucial benefit like retirement savings.”

The bill was backed by the Delaware state office of AARP, which surveyed state residents age 45 and older and found they are 15 times more likely to save if they can do so 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.

By reducing the public dependence on state assistance in retirement, AARP estimated that DE EARNS could end up saving taxpayers $18.2 million in the long run. The program is estimated to cost less than $1 million to set up and operate over the next three fiscal years, according to a fiscal note attached to HB 205.

“The pandemic has shown how vital it is for Americans to have savings to depend on,” AARP Delaware State Director Lucretia Young said in a statement upon the Senate’s passage.” DE EARNS would allow Delaware private-sector workers to easily save for the future to take care of themselves, and afford life’s necessities like food and medicine as they age.”