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Treasury Department Phasing Out myRA Retirement Savings Plan

Compliance
Article
08/11/2017
  • The U.S. Department of the Treasury is phasing out the myRA program, a federal retirement savings plan for individuals without access to a workplace savings plan.
  • The phase-out will occur over the coming months; the Treasury Department did not provide specific dates.
  • The Treasury Department cites high operational costs and low demand as the reasons for ending myRA.
  • The myRA program is no longer accepting new enrollments, but current accounts remain active and accessible. 
  • Participants will need to move their savings to other Roth individual retirement accounts (IRAs).  

High costs, low demand doomed myRA

After a little more than two and a half years, the federal government’s retirement savings program, myRA, is being phased out due to high operational costs and low demand. The Obama administration established myRA in 2015 to provide individuals with access to retirement savings accounts. 

In announcing the phase-out on July 28, 2017, the U.S. Treasury Department noted that “Demand for and investment in the myRA program has been extremely low. American taxpayers have paid nearly $70 million to manage the program since 2014.” myRA currently has approximately 20,000 investors; another 10,000 accounts exist but are not funded. The median balance for funded accounts is $500 each. Altogether, savers have invested approximately $34 million in myRA accounts.

However, the taxpayer cost for myRA totals nearly $70 million, with an estimated cost of $10 million for each year it continues.  

The Department of Treasury did not provide specific dates by which accounts must be liquidated, but committed to “communicating frequently with participants to help facilitate a smooth transition to other investment opportunities.” Participants will be allowed to transfer accounts to other Roth IRAs, or close accounts.

Some states and municipalities working to establish their own Roth IRA retirement plans for individuals without access to workplace savings programs had planned to use myRA as a conservative, low-cost investment option. The shutdown of myRA will delay the rollout of Washington state’s Small Business Retirement Marketplace. Oregon and California also expected to use myRA as an investment option in their programs.

Those eligible for myRA had annual incomes of less than $129,000 (couples had less than $191,000). The program allowed participants to make post-tax contributions by way of employer direct deposit ($5 minimum per payday), one-time or recurring contributions through bank accounts, or direction of all or a portion of federal tax refunds. Accounts had a maximum allowable balance of $15,000, after which participants had to roll their money into a private-sector Roth IRA. Accounts were invested in a Treasury retirement savings bond.

myRA participants need to find other retirement savings vehicles

The impact of myRA’s demise falls mainly on its investors. They will need to find alternatives for ongoing retirement savings, such as traditional IRAs or Roth IRAs. Eventually they must liquidate or transfer their myRA balances.

Employers that had allowed employees to use payroll deposit for myRA contributions — and lack a workplace retirement plan — will be without an option to assist these individuals in saving for retirement. 

Former myRA investors best served by employer-sponsored retirement plans

With the United States facing a retirement savings crisis, combined with a low unemployment rate, employers best serve their interests by offering a retirement plan. This valued benefit attracts and retains talent, and enhances employees’ retirement readiness. Prior myRA participants will most likely seek opportunities to continue their savings habits and/or roll their myRA balances into new retirement accounts. 

Paychex offers a number of retirement plan options to help both employers and employees with these needs.

Jessica curtin headshot

Jessica Curtin, QKA, CPFA, TGPC, Retirement, FSA, and HSA Compliance Analyst

Jessica joined the Compliance Risk organization of Paychex in October 2016 as a Retirement, FSA, and HSA Compliance Analyst. In this role, she is responsible for regulatory compliance of the Paychex retirement and Section 125 products, government and industry group relations, and business partner consulting.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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