MyRAs: They’re ‘Official’
The Treasury Department has officially launched its MyRA program
on a national basis, hoping to “create a savings habit that will grow,” according to Treasury Secretary Jacob Lew.
While the Nov. 4 launch was new, the program is not. Originally unveiled in President Obama’s 2014 State of the Union address, the MyRA initiative
has been operating since late last year in a pilot program with a number of employers.
The program, basically a Roth IRA in structure, has been refined somewhat. During the launch, it was announced that the program carried no fees or cost to open, subjected the saver to no risk of principal loss (accounts will earn interest at the same rate as in the Thrift Savings Plan’s Government Securities Fund, which had an average annual return of 3.19% over the 10-year period ending Dec. 31, 2014), and could be opened with any contribution amount.
While there has been some clarity around the investment and fee structure, and some enhancement of both the web and informational materials, the biggest improvement to emerge from the employer pilot appears to be the development of the ability to have contributions drawn directly from a checking or savings account, rather than relying on direct deposit. This change was specifically done to enhance access to the product’s “target” audience: non-savers, particularly “1099 workers” who don’t get a regular paycheck; self-employed business owners; and those who are not covered by, or are not eligible for, an employment-based plan.
That said, MyRA retains the $15,000 accumulation cap, at which point it is assumed that the balance will roll into another retirement vehicle. There are no provisions for employer matching contributions, and the standard income limits for Roth IRA contributions apply, as do the contribution amounts ($5,500 annually and another $1,000 in catch up contributions for those over age 50-1/2).
Mark Iwry, Senior Advisor to the Secretary of the Treasury and Deputy Assistant Secretary (Tax Policy) for Retirement and Health Policy at the U.S. Treasury Department, emphasized on the launch announcement that this program was not set up to compete with employment-based plans, and he encouraged employers who were interested in providing matching contributions to consider setting up a “regular” plan, such as a 401(k).
That said, in the introductory comments, Richard Ludlow, Executive Director of MyRA at Treasury, noted that fees were a concern of some employers
in setting up such plans, and that individual savers, particularly those who had not saved previously, were also concerned about fees and “complicated” fund menus, as well as market risk.
“Welcome, U.S. government, to the wonderful world of being a small business retirement plan provider,” commented Brian Graff, CEO of the American Retirement Association. “You will certainly learn, as the private sector has, how challenging it is to distribute retirement plans to the micro market.”