The Delaware EARNS low-cost retirement savings program started accepting employer registrations Monday.
The program had its pilot in May and aims to help employers who have five or more workers and no retirement plan, according to the program’s director, Ted Griffith.
“Really, what it’s intended to do is close the retirement savings gap,” Griffith said. “We certainly recognize that many, many Delawareans, and many Americans for that matter, are not saving enough for retirement. A big way to correct this problem is to give them, through their jobs, an opportunity to save for retirement through simple payroll contributions.”
Under the program, employers default to a 5% deduction from an employee’s gross check.
Griffith said the program identified a 5% deduction as a “sweet spot” because it’s significant enough to build savings and not be a burden.
“We recognize, of course, that people are out there struggling,” Griffith said. “That's what this program is all about, is helping people build wealth and live better lives.”
The payroll deduction is then invested in the employee’s Roth IRA to go toward retirement savings.
Workers in the U.S. are about 15 times more likely to save for retirement when their workplace has a savings plan, according to AARP Research. That jumps to 20 times more likely when the contributions are automatic.
Employers have a 30-day window between registration and implementation to notify employees, who can then opt-in, adjust the default 5% rate or opt-out altogether.
Delaware is now the 10th state to offer a state-sponsored IRA program.
First State employers have until October 15 to register with the program or certify they are exempt.
