The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in Minneapolis, MN is representative of common inquiry related to the new My Retirement Accounts or MyRAs. The advisor asked:
“What is the status of the My Retirement Account (MyRA) program from the government? Isn’t it effective for 2014?”
Highlights of Discussion
You are correct; the government intends to have MyRAs up and running by the end of 2014, at least in a pilot program. And, although the Treasury Department has more information and printable materials for individuals and employers who are interested in participating on its “ready.save.grow” web site at Myra: My Retirement Account, as well as on The White House Blog, some specific operational details are still elusive.
Here is a summary of what we know about MyRAs so far.
• The new MyRA retirement savings program will be run by a private-sector money management firm chosen by the Treasury Department from a field of up to 30 firms after completion of a competitive bidding process. The selected financial agent will support the issuance of retirement savings bonds, to be made available to the public through MyRA accounts. The financial agent will provide custodial, administrative, record keeping, accounting and back office services in connection with the myRA program. Applications were due March 31, 2014; finalists have not been announced.
• MyRAs will function like Roth IRAs and be secured by the U.S. Department of Treasury, similar to a savings bond. Consequently, the accounts will have principal protection, guaranteeing to account owners that their balances will not decrease.
• The government will not assess any administrative fees on the accounts.
• An individual worker will be able to invest in a MyRA if his or her annual income is less than $129,000 a year, and working couples will be able to invest if their joint income is less than $191,000 a year (same as Roth IRA income eligibility rules).
• Businesses will not be required to offer, administer or run the accounts. If they choose to make MyRAs available, their only obligation will be to offer them to their employees through automatic payroll direct deposit, if the employee decides to participate.
• Employees will sign up online for myRAs and customer service will be provided by Treasury’s selected financial agent.
• There is no cost to open an account.
• Initial investments will begin at $25, and subsequent investments could be as low as $5 at the election of the participant.
• Accounts will be portable, meaning participants have the ability to move them from one job to the next and roll them over into private sector retirement accounts at any time.
• Participants will be able to withdraw their contributions tax-free at any time; but earnings, generally, will not be available for tax-free withdrawal until the participant reaches age 59-1/2.
• MyRAs will receive the same variable interest rate return that the federal Thrift Savings Plan Government Securities Investment Fund receives, which is available to federal employees through the Thrift Savings Plan.
• Once a MyRA owner’s balance grows to $15,000, or after 30 years, which ever happens first, the MyRA owner must roll the accounts over into a private-sector Roth IRA.
Conclusion
Much is known about the MyRA program scheduled for launch by the end of 2014. However, key information, such as what private-sector financial firm will be selected as the administering financial agent and when, specifically, accounts will be available for establishment are undefined at this time.
The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2014 Columbia Management Investment Advisers, LLC. Used with permission.
