The U.S. Department of Treasury has announced the national launch of the myRA program.
With individuals being able to fund the accounts through payroll deduction and the program’s availability to those not participating in as well as those not eligible for an employer-sponsored retirement plan, employers need to prepare. Speaking at the American Retirement Association’s 2015 ASPPA Annual Conference, J. Mark Iwry, senior adviser to the secretary and deputy assistant secretary for retirement and health policy at the U.S. Department of Treasury, said the department has piloted payroll deduction into the myRA program with a group of employers to make sure any kinks are worked out.
Individuals can set up automatic direct deposit contributions to myRA through their employer, fund a myRA account directly by setting up recurring or one-time contributions from a checking or savings account, and at tax time, direct all or a portion of a federal tax refund to myRA.
For employees who have not yet met the eligibility provisions of their employer-sponsored retirement plan, part-time employees who may never be eligible, or even eligible employees who feel they cannot save much or are afraid of investing in the market, myRA is a good way for employers to encourage them to start saving for retirement. The program requires an initial contribution of at least $25 and automatic ongoing contributions of $5 or more every payday, and accounts are available to any individual with an annual income of less than $129,000 or a couple with annual income of less than $191,000.
NEXT: Starting a savings habit
“Treasury is trying to provide an easy way for those who have never saved to dip their toe in and not worry about losing assets in the market,” Iwry said. “Once they get into the savings habit, they can rollover their accounts into private-sector IRAs.” Iwry said the accounts are invested in a new U.S. savings bond.
As myRA account holders grow their savings, they have the option to transfer to a private-sector Roth IRA with diverse investment options at any time, or transfer to a private-sector Roth IRA once they reach the maximum myRA balance of $15,000. The myRA accounts are like Roth IRAs in that taxes are paid up front, not at distribution time.
At the ASPPA conference Iwry and Phyllis C. Borzi, assistant secretary of labor for the Department of Labor’s (DOL) Employee Benefit Security Administration (EBSA), each said their departments are focused on expanding retirement plan coverage. In developing the myRA initiative, Iwry received an information letter from the DOL stating that myRA would not be subject to the Employee Retirement Income Security Act (ERISA).
More information about myRA is at https://myra.gov/.