Obama's MyRAs Meant as Complement To Employer-Sponsored Plans, Official Says

President 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 subcommittee hearing.

“Employees 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).

These 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.

“The 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.

The hearing, the second in a series on retirement security, was titled Retirement Savings for Low-Income Workers.

Lifelong Savings

Iwry said 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.”

The myRA 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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