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Washington state’s retirement plan marketplace for small businesses won’t be launching as soon as state officials had hoped after the federal government announced that it’s discontinuing the myRA program.
The state had hoped to open the Small Business Retirement Marketplace by Labor Day, but the myRA announcement will set it back at least a few weeks, Carolyn McKinnon, director of the Washington marketplace, told Bloomberg BNA.
The state statute that set up the marketplace required financial services firms participating in it to offer the U.S. Treasury Department’s myRA program as an option, said McKinnon, also policy adviser in the state Commerce Department’s external relations division. The online marketplace gives businesses with 100 or fewer employees a place to select retirement plan providers for their workers.
The myRA would have been the only free-of-charge retirement plan option, McKinnon said.
Treasury announced on July 28 that the myRA program would no longer accept new enrollments because it wasn’t cost-effective. Current accounts will stay open and accessible for now, according to the myRA website. The myRA account, which was proposed by President Barack Obama in his 2014 State of the Union address, essentially functioned as a Roth individual retirement account, with after-tax money being contributed. With its $15,000 savings limit, myRA aimed to help Americans with no workplace retirement account and little or nothing saved to start socking money away for that purpose.
The announcement came after Democratic lawmakers, including Sens. Patty Murray (Wash.) and Ron Wyden (Ore.), urged Treasury to continue the program. The senators said one reason for their concern was the recent scrapping of Labor Department rules aimed at encouraging states and cities to provide retirement savings programs for private sector workers who lack a work-sponsored retirement plan. Earlier this year, Congress passed—and President Donald Trump signed into law—resolutions to nullify the state and city program rules that were issued by the Obama administration.
While the postponement in Washington won’t be too long, it’s still “a substantial setback for 2 million workers who don’t have access to a retirement plan at work,” McKinnon said.
The marketplace will be available to individuals as well as employers. Private financial firms that join the marketplace must agree not to assess administrative fees on employers and to keep investment management fees at or below 100 basis points (1 percent). New Jersey has enacted a similar marketplace but has yet to set a launch date.
Senate Finance Committee Chairman Orrin Hatch (R-Utah) praised Treasury’s move to halt the myRA program in an Aug. 1 letter. He said that while the program may have been “well intended,” it wasn’t a benefit to retirement savers or workers.
Hatch also said the program may have been the Obama administration’s way of shoehorning in the automatic IRA proposal that was featured in several of Obama’s budget blueprints but was never enacted by Congress. Hatch called the program a “brazen sidestepping of Congress and a misuse of authority.”
The letter also says that the program could have caused Treasury to violate the Labor Department’s fiduciary rule and that the U.S. government would have been exposed to potential lawsuits if myRA account holders decided to sue for breach of fiduciary duty.
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The Hatch letter is at https://www.finance.senate.gov/imo/media/doc/8.1.2017%20myIRA%20Letter.pdf.
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