Treasury Softly Launches myRA Program

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By W. Mark Smith, Esq. and Alice Murtos, Esq.

Sutherland Asbill & Brennan LLP, Washington, D.C. and Atlanta, GA

In December 2014, the Treasury Department opened the myRA (my Retirement Account) program to employers and employees.  President Obama announced the myRA program in his 2014 State of the Union Address. The program is intended as an introductory retirement savings program for employees who do not have access to a worksite retirement plan.

    The program essentially consists of Roth IRA accounts, subject to the usual rules, invested only in a new class of nonmarketable, electronic U.S. Treasury retirement savings bonds that replicate the variable rate of the Government Securities Investment Fund (G Fund) of the Thrift Savings Plan for federal employees. The myRA must be rolled over to a private sector Roth IRA when the balance reaches $15,000 or 30 years after it is opened and first funded, whichever comes first; it may be closed and distributed or rolled over, or withdrawals may be taken, at any prior time.

    On December 12, the Treasury issued final regulations authorizing the new retirement savings bond. The regulations permit the setting of minimum amounts for initial and additional contributions to the bond, although no such limits are initially in effect. The maximum annual contribution to the bond is tied to the Internal Revenue Code §408A limits for Roth IRAs.

    A Treasury website, is now live. The website provides resources for both individuals and employers to use in connection with myRA accounts. These resources include:

    •   For employees, a savings calculator, various descriptions of the program including a Top Questions document, and a facility to apply for a myRA account online through a sign-up link to a website operated by Comerica Bank, which has been engaged as the Treasury's financial agent to administer the program in partnership with Fidelity National Information Services (FIS). Under the master custodial account agreemen, Comerica will serve as custodian for the Roth IRAs. The Comerica website includes detailed FAQs about the program and provides contact information for a customer service center (which can also process enrollments by telephone).
    •   For employers, a guide and various materials to use in promoting myRAs to employees (including a poster, a brochure, intranet collateral, and a web banner) and conducting an employee meeting (a fact sheet, sample email invitations, and a PowerPoint presentation). Other than remitting payroll deductions for employees, this appears to be the only employer function in the myRA program as initially structured and, as discussed below, even this much involvement appears optional. Contact information for the Treasury is also provided.

    From these materials, it appears that:

    •   The only myRA account-opening activity permitted or required through the website is voluntary on the part of employees. Automatic enrollment is not currently available.
    •   Initially, contributions are limited to employee payroll deductions transmitted by the employer through direct deposit. The materials suggest that in the future Treasury will provide other means for individuals to contribute. Employer contributions are not part of the program at the outset.
    •   While certain employers (reportedly including the U.S. Office of Personnel Management) will formally participate in a pilot initiative, the myRA program apparently is open to any employer that will accommodate payroll direct deposit for employees who open an account. No formal action on the part of the employer appears required, except as necessary for the transmittal of payroll deductions to employees' myRA accounts. Even for employers participating in the pilot initiative, the program appears primarily employee-driven at this time.
    •   That is, the decisions about opening or closing a myRA, how much to contribute, and when to take a withdrawal will be made solely by Roth IRA-eligible employees through affirmative election, subject only to the employer's direct deposit accommodation.
    •   From the materials we have reviewed, it is unclear whether employers are specifically obligated to transmit payroll deductions to employees' myRA accounts within a designated number of days.
    • According to the master custodial account agreement, cash balances in a myRA account awaiting contribution or distribution are not interest-bearing but are FDIC insured. Comerica generally commits to same-business day processing of contributions and (once funds are received from the retirement savings bond, which can take up to five business days) withdrawals. Investments in the retirement savings bond are not FDIC insured.
    •   Only one myRA is allowed per individual, although it is permissible to also have inherited myRAs. Once an individual has held a myRA account to maturity – i.e., for 30 years or to a $15,000 account balance – he or she may not open another myRA.
    •   At maturity, the retirement savings bond no longer accrues interest and is redeemed by the custodian, which automatically closes the myRA account and transfers the balance to a Roth IRA designated by the individual or, absent such direction, to a default Roth IRA to be designated by the Treasury.
    •   The materials state that myRA account owners pay no fees or charges.  Treasury has not publicly addressed how Comerica and FIS are being compensated.

    On the basis of the program as initially structured, the Department of Labor (DOL) issued on December 15 an information letter concluding that employer involvement with myRA accounts is insufficient to give rise to an ERISA employee benefit plan (absent reimbursement of employee contributions by the employer). The letter implies that future enhancements to the myRA program could affect DOL's analysis.

    •   If any party other than the federal government was performing the role played by Treasury in the myRA program, prior authority suggests that DOL may have reached a different conclusion.

    Guidance on the rollover of myRA balances to private sector Roth IRAs is to be provided in the future.

    For more information, in the Tax Management Portfolios, see Kennedy, 367 T.M., IRAs,  and in Tax Practice Series, see ¶5610, IRAs.

    © 2015 Sutherland Asbill & Brennan LLP.