The Department of the Treasury is offering myRA in response to a presidential directive to the Secretary of the Treasury to develop a retirement savings security focused on new and small-dollar savers. The myRA, or “My Retirement Account,” program will be administered by the Treasury Department and its financial agents, and will be targeted at lower- and medium-income individuals who generally are not currently saving and are not eligible to participate in an employer-sponsored retirement plan.
Title I of the Employee Retirement Income Security Act (ERISA) applies to any employee benefit plan that is established or maintained by an employer engaged in commerce or in any industry or activity affecting commerce, with few exceptions. While the myRA program is designed to provide retirement income to individuals, including employees, John J. Canary, director of regulations and interpretations, U.S. Department of Labor (DOL), states, “we do not believe Congress intended in enacting ERISA that a federal government retirement savings program created and operated by the U.S. Department of the Treasury would be subject to the extensive reporting, disclosure, fiduciary duty or other requirements of ERISA, which were established to ensure against the possibility that employees’ expectation of a promised benefit would be defeated through poor management by the plan sponsor and other plan fiduciaries.”
The department maintains that an employer would not be establishing or maintaining an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, given the program’s voluntary nature; its establishment, sponsorship and administration by the federal government; and the absence of any employer funding or role in its administration or design. This view is based on the facts that employees participate through payroll withholding contributions and that the employer distributes information, facilitates employee enrollment and otherwise encourages employees to make deposits to myRA accounts owned and controlled by employees.
The myRA program is established with the following conditions:
- A myRA account will invest only in a new Treasury retirement savings bond, which will be available only to myRAs;
- The account will be a Roth individual retirement account (IRA) and is thus subject to the rules applying to Roth IRAs, including contribution limits, income limits and taxability rules. An employer making myRAs available by payroll deduction is not responsible for compliance with any of these rules or limits; and
- There will be no fees to open and maintain a myRA; and, because the account can invest only in the myRA Treasury retirement savings bond, the account will never lose value, except as a result of withdrawals. Additionally, the assets can be rolled over at any time to a private-sector Roth IRA, and this will be done when the retirement savings bond matures after 30 years or once its total value reaches $15,000.
Employees may initially make contributions only via payroll deduction. The Treasury intends to expand the program to eventually allow individuals to make contributions by other means. At this time, the decision to open or close an account, how much to contribute, and whether or how to take a withdrawal would be made by employees by affirmative election, except for the rollover when the retirement savings bond matures after 30 years or once its total value reaches $15,000. The Treasury does not currently intend for employers to implement automatic contribution arrangements or automatic enrollment.
Through the myRA program, the Treasury Department or Treasury’s financial agent will make information and enrollment and election forms available for employers to then provide to their employees. Currently, in order for an employee to make contributions to a myRA, the employer must agree to forward the employee’s payroll deduction contributions. Employers would also be expected to cooperate in processes or procedures that the Treasury or its financial agent establishes to ensure that employee withholdings are being promptly and correctly remitted. Employers would not make employer contributions to myRAs and would have no investment or other funding obligations, or have any custody or control over account assets.
The complete information letter written from John J. Canary, director of regulations and interpretations, U.S. Department of Labor, in response to J. Mark Iwry, senior advisor to the secretary and deputy assistant secretary for retirement and health policy, U.S. Department of the Treasury, is available here.
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