Delaware Retirement Mandate: EARNS Rules for Employers

The first Delaware employer I helped through this had already thrown the letter away. It arrived with a code printed on it, no logo he recognized, and language about retirement savings, so he read it as a sales approach from a financial services firm and binned it. It was the state, the code was the only easy way to tell Delaware he was exempt, and the deadline printed on it had passed months earlier.

That is the shape of this mandate in practice. It is not a benefits decision you sit down and make. It is a compliance obligation that arrives in the mail, applies whether or not you open the envelope, and has a fixed dollar penalty attached to ignoring it.

What follows is who has to register, how the staged deadlines actually work, what noncompliance costs and when the state can start charging it, how the savings mechanics run without a dollar or a decision from you, and the honest case for sponsoring a 401(k) instead. I build people and records tooling for businesses without an HR department at FirstHR. FirstHR is an onboarding and HR platform, not a payroll provider or a retirement plan provider, and this is general information rather than tax or legal advice.

What Delaware EARNS Is

Delaware EARNS is the state-facilitated retirement savings program that satisfies the mandate. EARNS stands for Expanding Access for Retirement and Necessary Saving, and it is a payroll deduction Roth IRA arrangement rather than an employer-sponsored plan.

The founding statute is explicit that the program is meant to sit alongside private plans rather than replace them. Section 3801 describes EARNS as a public-private partnership designed to encourage, not replace or compete with, employer-sponsored retirement plans (Delaware Code Title 19, Chapter 38). That framing matters, because it explains why the exemption for sponsoring your own plan is clean and unconditional.

Delaware is one of a growing group of states running this model. If you employ people in more than one state, the comparison of programs and thresholds in the guide to state retirement plan mandates is the faster way to see where else you are on the hook.

Which Employers Must Register

You are covered if you employ five or more covered employees in Delaware, have been in business in the state for at least six months, and do not maintain a qualifying retirement plan. All three conditions have to be true at once, and the employee count looks backward as well as forward.

The statutory definition in Section 3802 is tighter than the plain-English version. A covered employer employs, and during the previous calendar year employed, at least five covered employees, and has been in business in Delaware for at least six months in the immediately preceding calendar year. The Delaware Office of the State Treasurer states the same test on its program page as five or more W-2 employees in Delaware, full-time or part-time, with the business operational for at least six months (Office of the State Treasurer).

The nonprofit point deserves a line of its own. Chapter 38 names nonprofit entities inside the definition of a covered employer, so a small charity with a handful of staff and no plan is under the mandate in the same way a for-profit business is. State-specific obligations like this one sit alongside everything else in the Delaware compliance requirements for employers.

The Deadlines and How They Reach You

Delaware has not run this on one statewide date. It has run a sequence of one-off staged deadlines, each tied to when a particular business was identified as covered, and each communicated by a mailed notice containing an access code.

The practical consequence is that you cannot answer the question when is my deadline by reading the statute. Chapter 38 says covered employers shall register when and as required by the board, which pushes the timing into program administration rather than into law. Your date is whatever the notice addressed to your business said.

If you cannot find the notice, that is a solvable problem rather than a dead end. The program will resend the access code to your email address, and both registration and exemption certification run off the same code paired with your federal Employer Identification Number. What you cannot do is wait for a friendlier reminder.

What Missing One Costs

Administrative penalties reach $250 per employee per year, with a maximum total of $5,000 per year. That ceiling comes straight from Section 3805 of Title 19, and the board has exclusive authority to enforce the chapter.

The path to a penalty is more forgiving than the number suggests. The board first issues a notice setting out the nature and extent of the alleged noncompliance, giving instructions for compliance, and specifying the potential penalties. Only if the employer fails to come into compliance within 90 days of that notice may the board initiate enforcement proceedings.

There is a separate exposure that no cure period covers. The statute preserves employer liability for failing to remit employee contributions, which is money you already withheld from somebody's pay. Treat those transfers with the same seriousness as tax deposits, because the legal character is similar.

How the Auto-IRA Works

Every meaningful setting in this program is decided by the state board or by the employee. Nothing on this list is a choice you make, which is why the mandate is administratively light even though it is legally binding.

The Roth default is the part that catches employers off guard when an employee asks about it. Contributions come out after tax, so a saver sees the deduction hit take-home pay in full rather than reducing taxable wages the way a traditional 401(k) deferral does. That is worth understanding before you explain a new line on the pay stub, even though the program handles the education itself.

The federal contribution ceiling is the other constraint people miss. Because these are IRAs, they inherit IRA limits. For 2026 the IRS set the annual IRA contribution limit at $7,500, with a $1,100 catch-up at age 50 and over, and the Roth income phase-out starts at $153,000 of modified adjusted gross income for single filers and $242,000 for joint filers (IRS Notice 2025-67, announced November 13, 2025).

Your Payroll Role

Your obligations under Section 3804 are four verbs: register, offer the choice, provide the program materials, and remit contributions on time. Everything else the program does itself.

Notice what is absent. You do not enroll people into their accounts, answer investment questions, manage portfolios, process distributions, or handle account changes. The program materials list each of those explicitly as things employers are not responsible for, and that list is the best short answer to a nervous owner asking how much work this will be.

No Money, No Fiduciary Duty

Two hard boundaries define this program, and both of them are in the employer's favor. You cannot put money in, and you cannot be held responsible for how the money performs.

This is the single most useful thing to understand about the state program, because it is what makes the choice between EARNS and a real plan a genuine choice rather than a formality. A sponsored plan brings fiduciary duty, plan documents, and in most cases a Form 5500 filing obligation. The state program brings none of that and buys you none of the advantages either.

It also means the phrase we offer retirement benefits is doing very little work if all you do is facilitate EARNS. You are providing access to a savings mechanism that any individual could open independently. Useful, genuinely valued by people who would otherwise save nothing, and not the same as a plan you fund.

Certifying Exemption

Sponsoring a qualifying plan exempts you, but the exemption is not automatic in the eyes of the program. You have to certify it, using the same access code and EIN, and doing nothing looks identical to noncompliance from the outside.

Section 3802 defines a specified tax-favored retirement plan as a plan qualified under or described in sections 401(a), 401(k), 403(b), 408(k) or 408(p) of the Internal Revenue Code, or an automatic enrollment payroll deduction IRA covering all covered employees and meeting the board's other conditions. In everyday terms: a 401(k), a pension or profit sharing plan, a 403(b), a SEP IRA, or a SIMPLE IRA.

EARNS or Your Own 401(k)

The honest comparison is not which is better but which problem you are solving. If the problem is a compliance obligation you want gone at zero cost, the state program solves it. If the problem is that you or your senior people want to save serious money, only a plan solves it.

Row one and row two are where most owner-operated businesses make their decision. A Roth IRA limit of $7,500 is roughly a third of the 401(k) deferral limit, and the income phase-out can shut an owner out of contributing to the state program entirely while the mandate still applies to the business. That combination is common in professional services firms.

What Sponsoring a Plan Costs

A new 401(k) costs less than most small employers assume, because federal credits absorb a meaningful share of the setup and administration in the early years. That does not make it free, and the ongoing obligations are real.

What you take on in exchange is a plan document, a recordkeeper, fiduciary responsibility for investment selection, and annual compliance work. The IRS overview of 401(k) plans sets out the qualification and operational rules a sponsor has to meet, including the annual nondiscrimination tests that verify deferrals and matching contributions do not favor highly compensated employees (401(k) plan overview), and the practical mechanics of getting one running are covered in the walkthrough on setting up a first 401(k).

Two design questions decide most small business outcomes. The first is whether you need a safe harbor design to escape annual testing, which depends on how much the owners want to defer relative to everybody else.

The second is how much of the newer flexibility from recent federal retirement legislation applies to your situation, since several of the provisions were written specifically for employers making a first attempt at this. Neither question exists under the state program, which is precisely the trade.

Where Employers Get This Wrong

Five patterns, and the first one is by far the most expensive.

Treating the notice as junk mail is first. The access code is the key to both registration and exemption, and the envelope does not look like a government demand. Tell whoever opens your post what to watch for.

Assuming a plan exempts you automatically is second. It exempts you legally and it does not exempt you administratively. Until you certify, the state has no way of knowing your plan exists.

Leaving part-time staff out of the count is third. The threshold counts covered employees regardless of hours, so a business that feels small by full-time headcount can still be over the line.

Forgetting that nonprofits are covered is fourth. Chapter 38 names nonprofit entities inside the definition, and small nonprofit boards frequently assume the opposite.

Letting remittances slip is fifth and is the only one that carries liability no cure period fixes. Money withheld from an employee's paycheck and not transferred is a different category of problem from a late registration.

Frequently Asked Questions