Barack Obama's proposal for “starter” retirement accounts is meant solely to
jump-start savings by workers not currently with access to employer-sponsored
retirement plans, a senior Treasury Department official said during a Senate
who are eligible for employer plans will not be the target audience for the
myRAs. They will have many good reasons to continue participating in those plans
instead of myRAs, which will complement and not compete with 401(k) or other
employer plans,” J. Mark Iwry, senior adviser to the Treasury secretary and
deputy assistant secretary for retirement and health policy, said in response
to a question from a lawmaker Feb. 26.
MyRA is the
name for the starter retirement accounts that Obama proposed in his Jan. 28
State of the Union address. Under the program, a Treasury security would be
held in a Roth individual retirement account. Workers could open the account
with as little as a $25 investment. Once the balance in a myRA reached $15,000,
the individual would have to roll over his or her account into a private-sector
Roth IRA (20 PBD, 1/30/14; 41 BPR 242, 2/4/14).
starter accounts “will be designed to help fill a niche in retirement saving by
providing a vehicle for deposits, largely by new savers, that may be too small
to be of interest to most commercial financial institutions that offer IRAs,”
Iwry said in written testimony to the Senate Finance Subcommittee on Social
Security, Pensions and Family Policy.
accounts will be easy for employers to offer, as employers will neither
administer the accounts nor contribute to them,” Iwry said. Their involvement
will be limited to facilitating employee contributions through payroll
deductions, he said.
hearing, the second in a series on retirement security, was titled Retirement
Savings for Low-Income Workers.
in response to a question that when the Treasury Department conceived of the
myRA program, it had in mind workers who are not saving for retirement now and
“don't have the good fortune to be in a defined benefit plan or eligible for a
401(k) plan or other employer-sponsored plan.”
program “is intended to start ordinary Americans down the path where 20 years
from now, they will be saving regularly on their own in a private-sector
retirement savings arrangement, ideally with employer plans,” Iwry said. “But
whether or not they are fortunate enough to be covered by employer plans, they
will be started on a habit of lifelong savings,” he said.
The ability to save for retirement and begin accumulating a nest egg “has worked wonders for a lot of people, including people in the lower range of the income distribution,” he said.
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