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Non-ERISA savings vehicle, with contributions made via salary deferral, launches in 2015
A Treasury Department final rule, effective Dec. 15, 2014, establishes the electronic retirement savings bonds for a new workplace retirement savings program aimed at small-dollar savers, the myRA (“my IRA”). MyRAs will be rolled out in 2015, with all employer resources available on the website myRA.treasury.gov. After the program launches, accounts can be set up at that site.
According to a Treasury fact sheet, worker eligibility requirements include annual incomes of less than $129,000 for individuals or less than $191,000 for married couples filing jointly. Annual myRA contribution limits are the same as for regular and Roth IRAs. For 2015, individuals can contribute a total of up to $5,500 to all of their IRAs combined, a category that now includes the myRA. Those 50 and older can contribute an additional $1,000.
Employers will have the opportunity, but are not required, to participate in the myRA program. The accounts, which must be funded exclusively through payroll deductions, will have the same tax benefits as Roth individual retirement accounts (IRAs), meaning that contributions are made with post-tax dollars and withdrawals during retirement will not be taxed.
Account investments are restricted to the new savings bonds, which are only available to myRA participants, and will protect the account holder’s contributed principal while earning interest at the same rate as the Thrift Savings Plan for federal employees’ Government Securities Investment Fund (G Fund). According to the Treasury, that fund earned an average annual return of 3.39 percent in the period from year-end 2003 through year-end 2013.
Employees’ participation in the myRA program can continue only until their MyRA balance reaches $15,000 or 30 years after their participation begins, whichever occurs first. At that point, the myRA must be rolled over into an individual Roth IRA, which can be reinvested in a more diversified manner.
In a posted letter, J. Mark Iwry, senior advisor to the Treasury secretary and deputy assistant secretary for retirement and health policy, explained:
“Under the myRA program, employers would provide employees with information and enrollment and election forms made available by the Treasury Department or Treasury's financial agent. Some employers that do not offer a retirement plan or that have employees who are ineligible to participate in an employer-sponsored retirement plan may want to more actively encourage their employees to set up myRA accounts. …
“In order for an employee to make contributions to a myRA account, the employer must agree to forward the employee's payroll deduction contributions. Employers would also be expected to cooperate in processes or procedures that Treasury or its financial agent establishes to ensure that employee withholdings are being promptly and correctly remitted. Employers would not make employer contributions to myRAs and would have no investment or other funding obligations, or have any custody or control over account assets.”
Given the voluntary character of the program and the absence of any employer funding or role in the program’s administration or design (other than directing employees’ salary-deferred contributions to the plan), Iwry noted that in the view of the Treasury Department, the sponsoring employer “would not be establishing or maintaining an ‘employee pension benefit plan’ within the meaning of section 3(2) of ERISA [Employee Retirement Income Security Act].” Therefore, as with health savings accounts established through the workplace, myRAs will not be subject to ERISA plan administrative and fiduciary responsibilities.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Related SHRM Articles:
Attraction of myRAs Examined, SHRM Online Legal Issues, January 2015
Get to Know myRA: Top Five Questions About the U.S. Treasury’s New Retirement Account Program, SHRM Online Benefits, August 2014
President Proposes 'MyRAs’ for Small-Dollar Savers, SHRM Online Benefits, January 2014
Related External Article:
12 things you should know about the myRA, MarketWatch.com, December 2014
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