MLR

Treasury explains myRA program details

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Seizing the occasion of “National Small Business Week” in mid-May, the U.S. Department of the Treasury encouraged small business owners to learn more about making starter savings accounts, called myRAs, available to their employees.

The Treasury has provided more details on its website about the working of the myRA program that it will roll out later in 2014.

President Obama promised in his 2014 State of the Union address that he would take executive action to create myRAs that would be available through employers and backed by the U.S. government. MyRAs were described as being simple, safe and affordable starter savings accounts to help low- and moderate-income wage earners save for retirement.

On its website, the Treasury stated that in late 2014 it will begin offering the myRA program. Treasury highlighted these key features of myRAs:

  • Employees may open an account with as little as $25.
  • Account holders may add to savings through regular payroll direct deposit – $5 or more every payday.
  • Account holders will pay no fees.
  • MyRAs will earn interest at the same variable rate as the Government Securities Investment Fund in the Thrift Savings Plan for federal employees.
  • MyRAs will not be limited to one employer – the account will be portable.
  • MyRA contributions can be withdrawn tax-free.

Earnings can be withdrawn tax-free after five years if the saver is at least age 59 1/2.

Account holders can build savings for 30 years or until their myRA reaches $15,000 – whichever comes first. After that, myRA balances will transfer to private-sector Roth IRAs.

As further explained in Treasury’s “myRA: Top Questions & Answers,” the myRA account will hold a new add-on Treasury security. As a result, savers will add to the value of a single security with each contribution they make, rather than buying additional securities. The security in the myRA account – like other U.S. savings bonds and Treasury securities – will be backed by the U.S. Treasury.

The retirement savings account will be a Roth IRA account and have the same tax treatment and follow the rules of Roth IRAs. The same tax advantages that apply to Roth IRAs will also apply to myRAs.

An individual who changes jobs can continue to add savings to an existing myRA account by setting up deposits through any employer that offers payroll direct deposit. An individual with multiple jobs will be able to use direct deposit from each paycheck to contribute to a single myRA. The deposits will be automatic every payday.

Employers will not be required to make myRA available to their employees.

Treasury said it will finalize procedures for rollovers to private-sector accounts (after the account is 30 years old or has reached its $15,000 maximum) when it launches myRAs later in 2014.