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Can I offer a 401(k) plan to my employees in Delaware? What are the requirements?

Requirements for Offering a 401(k) Plan in Delaware

To offer a 401(k) plan to your employees in Delaware, you must comply with both federal and state regulations. Here are some of the requirements:

  1. Eligibility: You must determine which employees are eligible to participate in the plan. Generally, employees who are at least 21 years old and have worked for the company for at least one year must be allowed to participate.
  2. Contributions: Both you and your employees can contribute to the plan. The maximum contribution limit for 2021 is $19,500, and employees who are 50 or older can make an additional catch-up contribution of $6,500.
  3. Vesting: You must determine the vesting schedule for the plan. Vesting refers to the percentage of the plan that an employee owns. The vesting schedule determines how long an employee must work for the company before they are fully vested.
  4. Reporting: You must file annual reports with the IRS and the Department of Labor.
  5. Fiduciary Responsibility: You have a fiduciary responsibility to act in the best interests of your employees and the plan. This includes selecting and monitoring investment options and ensuring that fees are reasonable.

Delaware State-Specific Requirements

In addition to the federal requirements, Delaware has some state-specific requirements for offering a 401(k) plan:

  1. Registration: You must register your plan with the Delaware Secretary of State.
  2. State Taxes: Delaware does not have a state income tax, so your employees will not pay state income tax on their contributions or earnings. However, you must withhold federal income tax.
  3. Delaware EARNS Program: Delaware has launched the Delaware EARNS program, which is a state-sponsored retirement savings plan for private-sector workers who do not have access to a workplace retirement plan. The program is expected to launch in 2025 [5].

It is important to consult with a financial advisor or a retirement plan specialist to ensure that you are complying with all federal and state regulations when offering a 401(k) plan to your employees in Delaware.

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Source(s):
Jurisdiction

Delaware