MyRA Takes Shape, Raises New Questions
While finalizing many of the details of the MyRA program, Treasury and the Department of Labor (DOL) may have unearthed some serious new questions.
These concerns stem from an information letter from the DOL to Treasury answering two key questions about the MyRA program:
- whether the retirement savings accounts established under the MyRA program would be covered under Title I of ERISA; and
- whether an employer participating in the MyRA program would be considered to be establishing or maintaining an ERISA covered “employee pension benefit plan.”
The DOL told Treasury that the answer to both questions is “No” — the MyRA accounts would not subject to ERISA nor would participating employers be considered to have established or maintained an ERISA “employee pension benefit plan.” But in offering a rationale for that determination, the DOL offered a rationale that calls into question the prospects for the dozen or so state-based IRA initiatives currently under consideration.
Rather than simply update Interpretive Bulletin 99-1, issued in June 1999, which “clarifies the circumstances under which an employer may facilitate employees’ voluntary contributions to IRAs by providing an IRA payroll deduction program without thereby inadvertently establishing an employee benefit pension plan,” the DOL basically ignored that foundation. Instead, the DOL chose to emphasize that while ERISA “broadly defines” an “employee pension benefit plan” set the MyRA program outside ERISA’s boundaries because it is “a federal government retirement savings program created and operated by the U.S. Department of the Treasury.”
This extremely narrow legal reasoning suggests that the DOL now considers any payroll deduction IRA program not operated by the federal government to be “an employee pension benefit plan” under ERISA, a departure from a policy determination that has been in place at the DOL for 15 years.
If true, this new interpretation will have significant implications for the retirement plan coverage initiatives currently being debated and/or implemented in many states, including California, Connecticut and Illinois. In fact, all of these state initiatives will die if it is determined that the payroll deduction IRA programs serving as the cornerstone of these initiatives are covered under Title I of ERISA. Why? Because in the words of the DOL’s own information letter, these initiatives would now “be subject to the extensive reporting, disclosure, fiduciary duty, or other requirements of ERISA” in addition to violating the statutory requirements established for the programs under state law.
Recent MyRA Updates
The most recent MyRA updates included selecting Comerica Bank as custodian for the MyRAs and issuing final regulations creating the retirement bonds for the program.
Andrew Remo is ASPPA’s Congressional Affairs Manager.