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Treasury Ends Obama-Era Program to Help Workers Save for Retirement Treasury Ends Obama-Era Program to Help Workers Save for Retirement
(35 minutes later)
An Obama-era program that created savings accounts to help more people put away money for retirement is being shut down by the Treasury Department, which deemed the program too expensive.An Obama-era program that created savings accounts to help more people put away money for retirement is being shut down by the Treasury Department, which deemed the program too expensive.
The 30,000 participants in the program, known as myRA and intended for people who did not have access to workplace savings plans, will receive an email on Friday morning alerting them of the closure. Participants will be informed that they can roll the money into a Roth individual retirement account, the Treasury Department said.The 30,000 participants in the program, known as myRA and intended for people who did not have access to workplace savings plans, will receive an email on Friday morning alerting them of the closure. Participants will be informed that they can roll the money into a Roth individual retirement account, the Treasury Department said.
President Barack Obama ordered the creation of these so-called starter accounts three years ago, and they became available at the end of 2015. Since then, about 20,000 accounts have been opened with participants contributing a total of $34 million, according to the Treasury, with a median account balance of $500. An additional 10,000 accounts have been opened but their owners have not made contributions.President Barack Obama ordered the creation of these so-called starter accounts three years ago, and they became available at the end of 2015. Since then, about 20,000 accounts have been opened with participants contributing a total of $34 million, according to the Treasury, with a median account balance of $500. An additional 10,000 accounts have been opened but their owners have not made contributions.
Jovita Carranza, the United States Treasurer, said in a statement that demand for the accounts was not high enough to justify the expense. The myRA program has cost $70 million since 2014, according to Treasury, and would cost $10 million annually going forward.Jovita Carranza, the United States Treasurer, said in a statement that demand for the accounts was not high enough to justify the expense. The myRA program has cost $70 million since 2014, according to Treasury, and would cost $10 million annually going forward.
The goal of myRA — which operated much like a Roth I.R.A. — was to encourage saving, particularly among lower-income workers. Workers were able to contribute up to $5,500 a year, or $6,500 if they were 50 or older. The money could be deducted automatically from their paychecks, or they could contribute to the accounts by directly transferring funds from a checking or savings account.The goal of myRA — which operated much like a Roth I.R.A. — was to encourage saving, particularly among lower-income workers. Workers were able to contribute up to $5,500 a year, or $6,500 if they were 50 or older. The money could be deducted automatically from their paychecks, or they could contribute to the accounts by directly transferring funds from a checking or savings account.
The myRA program was deemed a conservative way to save — and tailored for people who were not accustomed to investing in the markets — because account owners could not lose money. The funds were invested in United States Treasury savings bonds, which paid the same variable rate as the Government Securities Fund, available to federal employees through the government retirement plan.The myRA program was deemed a conservative way to save — and tailored for people who were not accustomed to investing in the markets — because account owners could not lose money. The funds were invested in United States Treasury savings bonds, which paid the same variable rate as the Government Securities Fund, available to federal employees through the government retirement plan.
There was no minimum deposit and no fees. But the maximum workers could save was only $15,000, at which point the balance would be rolled over to a retirement account in the private sector, perhaps into a more traditional stock and bond portfolio.There was no minimum deposit and no fees. But the maximum workers could save was only $15,000, at which point the balance would be rolled over to a retirement account in the private sector, perhaps into a more traditional stock and bond portfolio.
Mark Iwry, who built the myRA program over nearly six years while he served as senior adviser to the Treasury secretary during the Obama administration, said myRA was designed to have many uses over time. Besides being a safe way to introduce people to saving for retirement, it was also expected to serve as as a key investment option within some of the state-run retirement programs — geared for the millions of people without access to employer-sponsored plans — that are in the process of being created now.Mark Iwry, who built the myRA program over nearly six years while he served as senior adviser to the Treasury secretary during the Obama administration, said myRA was designed to have many uses over time. Besides being a safe way to introduce people to saving for retirement, it was also expected to serve as as a key investment option within some of the state-run retirement programs — geared for the millions of people without access to employer-sponsored plans — that are in the process of being created now.
It was also seen as a bucket of sorts that could capture the small sums of money that are often evicted from larger 401(k) plans when employees changed jobs — or a place to direct a portion of a tax refund. It was also seen as a bucket of sorts that could capture small rollovers that are often evicted from larger 401(k) plans when employees change jobs — or a place to direct a portion of a tax refund.
In fact, Mr. Iwry said his former team had hoped the new administration would follow through with its plan to market the program during the 2017 tax season, a period in which they hoped that the accounts would gain traction. “The idea was that it could be a versatile element within our national savings infrastructure,” Mr. Iwry said. In fact, Mr. Iwry said he and his former team had hoped the new administration would follow through with its plan to market the program during the 2017 tax season, a period in which they hoped that the accounts would gain traction. “The decision to cancel the myRA in its introductory phase reflects a fundamental misunderstanding of its purposes and potential as a long-term investment in working families economic security and financial independence,” Mr. Iwry said.
The closure of myRA isn’t the latest step taken by the Trump administration to attempt to reverse Obama-era savings initiatives and protections. Earlier this year, President Trump requested the review of a rule that requires brokers to put their customers interest first when handling their retirement money. He also signed a law that reversed a rule that would have made it easier for states to create their own retirement savings programs. The closure of myRA is the latest step taken by the Trump administration to reverse Obama-era savings initiatives and protections. Earlier this year, President Trump requested the review of a rule that requires brokers to put their customers interest first when handling their retirement money. He also signed a joint resolution that reversed a rule that would have made it easier for states to create their own retirement savings programs.
That has raised concerns among consumer advocates and some members of Congress. Earlier this month, a group of Democrats in Congress wrote a letter to Steven Mnuchin, the Treasury secretary, asking the department to demonstrate its support of the myRA program. Those actions raised concerns among consumer advocates and some members of Congress. Earlier this month, a group of Democrats in Congress wrote a letter to Steven Mnuchin, the Treasury secretary, asking the department to demonstrate its support of the myRA program.
“Given that this administration has worked to reduce access to retirement plans for millions of Americans, it is more critical than ever for the Treasury to strengthen one of their remaining options for retirement savings,” said the letter.“Given that this administration has worked to reduce access to retirement plans for millions of Americans, it is more critical than ever for the Treasury to strengthen one of their remaining options for retirement savings,” said the letter.
The letter was referring to the reversal of two rules that would have made it easier for states to create their own retirement savings programs.The letter was referring to the reversal of two rules that would have made it easier for states to create their own retirement savings programs.
Several states — including Oregon, California and Illinois — are still moving ahead with those plans. And while some states had plans to include myRA as a “safe” investment alternative, that will no longer be an option.Several states — including Oregon, California and Illinois — are still moving ahead with those plans. And while some states had plans to include myRA as a “safe” investment alternative, that will no longer be an option.