On January 29, 2014, President Obama issued a memorandum directing the Secretary of the Treasury to develop by year-end a new retirement savings security (originally called a “myRA”) focused on reaching new and small-dollar savers. On December 12, 2014, Treasury issued final regulations in response to the memorandum. The new retirement savings program established under the regulations allows individuals to establish Roth IRAs with Treasury's designated custodian - Comerica Bank. Contributions earn interest at the same annual percentage rate as securities issued to the G Fund in the Thrift Savings Plan for federal employees. These accounts have no start-up costs and no fees.
Eligible individuals may participate in the program until their account balance reaches $15,000 or until they have participated in the program for 30 years, whichever occurs first. Although the program was initially intended to allow for any amount of contributions, the final regulations provide that the Commissioner of the Fiscal Service is authorized to establish minimum amounts for initial and additional contributions to a retirement savings bond.
The Preamble to the final regulations provide that participants have the flexibility to withdraw their contributions at any time without a penalty. This is overly simplistic to the unwary and is not meant to imply that the entire account balance can be withdrawn without a penalty, however. The definition of a Roth IRA under 26 U.S.C. 408A is incorporated into the final regulations by reference. This means that participants who withdraw taxable amounts (e.g., earnings) prior to age 59 1/2 could be hit with the 10% penalty tax. In addition, earnings may still be taxed if the account has not been in existence for at least five years.
Some "pros" of the new program are that: (1) unlike other defined contribution plans, investments are guaranteed to increase in value; (2) there are no fees - a major complaint by participants in other defined contribution plans; and (3) balances are portable - that is, they can be transferred to commercial financial service providers at any time. Some "cons" are that: (1) the investment rate is minimal; (2) the investment alternatives are nonexistent (no stocks or mutual funds); and (3) the overall contribution limit is extremely small (as way of comparison, the 2015 401(k) contribution limit is $18,000).
Gain in-depth analysis of federal tax issues with more than 200 Portfolios, daily breaking news and developments, and commentary on emerging trends with a free trial to U.S. Income Portfolios Library.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)