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DE Earns is a win-win

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Good afternoon,

Every once in a while, a piece of legislation comes along that is a potential win-win for all concerned.

Such is the case with House bill 205 that authorizes DE Earns. The measure, sponsored by State Rep. Larry Lambert, D-Claymont,  has picked up bipartisan support.

Click here for a copy of the bill.

The state-sponsored program would offer smaller employers and the self-employed an opportunity to have a retirement program and address the critical issue of individuals not having sufficient funds for retirement.

Delaware is clearly behind the curve in this area, even though we once had a U.S. Senator (Bill Roth) who championed 401K) plans and even has a version of an Individual Retirement Account that bears his name. Roth was ahead of his time as he witnessed the decline in the use of pension plans offered by private employers and the nation’s abysmal savings rate.

State Treasurer Colleen Davis, a strong supporter of the legislation, notes that Delaware is only one of five states that have not even researched the feasibility of a retirement savings program that uses payroll deductions.

DE Earns has picked up support from AARP. It also has the endorsement of Jennifer McMillian, owner of JennyGems, Harbeson.  McMillan launched a manufacturing side to her home decor sign business and added 21 employees.  She sees DE Earns as a needed option.

Del-One Credit Union, the state’s largest, has also thrown its support behind the program.

According to AARP, a startlingly high 46 percent of Delaware employers have no access to a retirement savings plan. Sixty-six percent of Delaware workers employed by businesses with fewer than 100 employees do not have a pension or retirement plan.

Business shares some of the blame for this since 401 (K) retirement programs are available from many sources.  Still, many smaller employers are hard-pressed to devote their time to such matters.

The key feature of  DE Earns is its “opt-out” provision.

Unlike typical programs, a new employee would be automatically enrolled unless he or she chose not to participate. New employees often balk at signing paperwork when enrolling in a retirement plan.

State Treasurer Davis notes that opt-out plans have a  92% participation rate compared to 61% for voluntary plans.

Under the bill, businesses with more than five employees will be required to participate in Delaware Earns through a simple payroll process with the State Treasurer’s Office handling the rest. Employers who already offer employees some other form of retirement option would not need to participate.

The program would be overseen by a board of elected state officials who would tap into the state’s expertise and resources in managing retirement plans.

Details, including upfront costs to the state and investment options, are still being researched. But if adequate oversight and a fair process of selecting vendors is part of the legislation, there is little reason why this bill should not be on the governor’s desk by July. – Doug Rainey, chief content officer.