In 2014, President Obama announced a retirement program during his State of the Union Address. Dubbed myRA – short for My Retirement Account, the program is designed to help the roughly 50 million Americans without access to an employer sponsored retirement plan to save for retirement. The Treasury Department selected the Dallas-based firm Comerica to serve as the custodian of the program. Since the announcement, The Treasury Department has been slowly rolling out a myRA pilot program in a manner that has been described as "cautious and with little fanfare" by the media. To date, there have been few announcements as to which companies are using the program aside from the U.S. Office of Personnel Management. However, the pilot program has been operating since December. Here is what business owners need to know about this program.
If your company doesn't currently offer an employer-sponsored retirement plan or you have certain employees that are not eligible to participate, myRA may enable you to provide them with another option. The goal of myRA is to offer a retirement account solution that is simple for both employers and employees. myRA is free to run. The operations process is straightforward for employers: they advise workers that the myRA is available, and if employees choose to participate, employers can allow them to contribute to the myRA via direct deposit. Employers do not administer employee accounts, contribute to them, or match employee contributions. Materials are available at the myRA website, where employers can refer their staff for more information.
Employees are able to open accounts with a deposit of $25 and may contribute as little as $5 per pay period to participate. All funds are sent via direct deposit. The accounts are set up as Roth IRAs, where after-tax dollars are contributed and funds can be withdrawn anytime without taxes or penalties. The program allows individuals to accumulate a maximum of $15,000; once that benchmark has been reached, the account will be rolled over into a privately held Roth IRA account. If the threshold isn't reached in 30 years, the account is also rolled over to a Roth IRA.
The goal of the program is to create a "savings habit." Funds in myRA are invested in government bonds and earn a guaranteed return equal to that of the "G" fund in the government's Thrift Savings Plan. As a result, there's a lower risk of loss, but opportunities for return are also limited.
To learn more about the myRA program, to discuss implementing it at your business, or to access the employee educational materials, visit the dedicated Department of the Treasury website. Contact information is also available for businesses that wish to discuss it further with a program representative.