During his 2014 State of the Union Address, President Obama announced the creation of a new employer-sponsored (but not employer funded) savings program that is aimed at helping more people to start saving for retirement. Titled the “myRA” (say it like “IRA”), the program will establish accounts for employees who do not currently have employer-sponsored savings plans. myRA will operate much like a Roth IRA, with after-tax contributions and the ability for funds to be withdrawn tax-free at any time without penalty.
ontributions can be made through a payroll deduction, with an initial investment as low as $25 and ongoing payroll deductions as low as $5. The contribution limits on a myRA account are significantly lower than a Roth IRA. Married couples with modified adjusted gross incomes up to $191,000 and individuals earning up to $129,000 will be able to save up to $15,000 total in after-tax dollars for a maximum of 30 years. Roth IRAs generally allow contributions of up to $5,500 annually ($6,500 if the individual is over age 50). Once a saver’s myRA reaches $15,000, or after 30 years, the balance must be rolled over to a private sector retirement account. To manage myRA investments, the U.S. Treasury will create a security fund modeled after the Thrift Savings Plan Government Securities Investment Fund that is currently available to federal employees. This fund pays a variable rate which is generally lower than the potentially higher returns from a 401(k) plan.
owever, myRA savers cannot lose any money. The myRA accounts are meant to cost employers little or nothing to create since they will neither administer the accounts nor contribute to them. Employers are not required to offer them. The government is still setting up pilot programs to initiate the myRA savings program. Gray, Gray & Gray will continue to monitor the progress of the new program and keep you updated. If you have any questions about this or any other employee benefit issue, please contact Gray, Gray & Gray at (781) 407-0300.