AN ACT TO AMEND TITLE 29 OF THE DELAWARE CODE RELATING TO DEFERRED COMPENSATION.
HB423 amends Delaware’s deferred compensation law to add automatic enrollment for newly hired state employees into the State’s 457(b) deferred compensation plan. Under the bill, covered employees who do not opt out will be enrolled at a default contribution rate set by the Board, with an initial minimum rate of 3% of compensation and a maximum default rate of 15%. The Board may also implement automatic escalation, increasing the default rate by 1% or 2% annually based on years of participation, subject to the statutory cap and contribution limits.
The bill also requires contributions to be invested in a default investment selected by the Board, specifically an age-appropriate target date fund, unless the employee chooses another option. New employees must receive advance notice explaining automatic enrollment, opt-out procedures, contribution changes, investment choices, and refund deadlines. Employees generally begin contributions within 90 days of hire, and those who opt out after enrollment may request a refund of contributions within a deadline not to exceed 120 days from hire. The bill excludes employees covered by collective bargaining agreements unless automatic enrollment is expressly authorized in the agreement.
HB423 would amend Title 29 of the Delaware Code, Chapter 60, by adding and revising definitions and by creating a new automatic enrollment, automatic escalation, and default investment framework for the state’s 457(b) deferred compensation program. It also shifts payroll deduction authority to the Office of Management and Budget for this chapter and requires agencies to provide employee data needed to implement automatic enrollment. The bill preserves existing treatment of deferred compensation for pension and tax purposes, while clarifying that the Board will determine whether default contributions are pre-tax or post-tax. Its effective date is contingent on payroll system upgrades and a certification notice from the State Treasurer.
The bill appears generally favorable and administrative in nature, with no recorded committee transcript or vote history indicating organized opposition. Its purpose is framed as expanding retirement savings participation through automatic enrollment, a policy approach typically viewed as encouraging employee participation in deferred compensation plans. The absence of recorded votes or discussion suggests there is no documented controversy in the available materials, though the bill’s implementation depends on payroll readiness and Board rulemaking.
The main points of potential contention are the mandatory nature of automatic enrollment, the default contribution rate and escalation provisions, and the limited opt-out/refund window after enrollment begins. Employees covered by collective bargaining agreements are expressly excluded unless their agreements authorize automatic enrollment, which may reflect sensitivity to labor contract issues. Another possible issue is administrative readiness, since the act does not take effect until payroll upgrades are completed and certified, indicating implementation concerns rather than policy opposition.