Treasury Announces the Elimination of MyRA Retirement Plans

Claiming that demand for and investment in the myRA program has been extremely low, the Treasury Department announced on July 28 that it will begin to wind down the Obama-era program designed to encourage low- and middle-income Americans who lack access to a retirement plan at work to save for retirement by offering them access to a no-fee, principal-protected account.

Treasury officials said that a review that was undertaken as part of the administration's effort to assess existing programs and promote a more effective government had concluded that the myRA program was not cost effective. The review found that since it was first launched in 2014, 30,000 Americans have signed up for the accounts, but 10,000 of these account owners have made no contributions. So far, the Treasury said, a total of $34 million has been invested in myRA accounts, and the median account balance is $500. The review also showed that the government had spent nearly $70 million to manage the program since it was first announced, and a further $10 million a year will be needed to administer the program in the future.

Observing that retirement savers have options in the private sector that offer no account maintenance fees, no minimum balance, and safe investment opportunities, Treasury officials said participants in the myRA program are being notified of the upcoming changes, including information on rolling over their myRA savings to another Roth IRA. They also said that any myRA with a zero balance as of September 15, 2017, or later will be subject to "possible automatic closure." Account holders are encouraged to visit myRA.gov for additional information or to call myRA customer support with any questions.

The goal of the myRA accounts was to encourage saving, particularly among lower-income workers. Like a Roth IRA, a myRA account is funded with after-tax dollars, while distributions are tax-free. In 2017, myRA account owners could contribute up to $5,500 a year ($6,500 for those aged 50 or older) in after-tax dollars, provided they had modified adjusted gross incomes below $133,000 for individuals and below $196,000 for couples. The contributions could be deducted automatically from the account owner's paycheck, or be made directly through transfers from checking or savings accounts.

The myRA accounts could not lose their principal because the funds were invested in U.S. Treasury savings bonds, which paid the same variable interest rate as the Government Securities Investment Fund available to Federal employees. There were no setup costs or ongoing fees associated with the accounts, and no minimum contribution amount. But after the account holder had saved $15,000, the balance would be rolled over to a private sector retirement account with a wider selection of investment options.

"The myRA program was created to help low to middle income earners start saving for retirement," said Jovita Carranza, U.S. Treasurer. "Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program." Carranza added that Treasury will be communicating frequently with participants over the coming months to help facilitate a smooth transition to other investment opportunities.

Defenders of the myRA program observed that its uptake was low in part because President Obama created the program through executive order, and it thus lacked bipartisan support. In addition, the program lacked an automatic enrollment mechanism that would have caused more eligible workers to sign up, and the marketing budget needed to ensure that the workers targeted were aware of the program.

On July 14, a group of congressional Democrats sent a letter to Treasury Secretary Steven Mnuchin calling on his department to maintain and promote the myRA program. They noted that earlier this year President Trump had signed into law a reversal of Labor Department rules that made it easier for states to establish retirement savings programs for private sector workers who lack access to such plans. "Given that this administration has worked to reduce access to retirement plans for millions of Americans," the letter said, "it is more critical than ever for the Treasury to strengthen one of their remaining options for retirement savings."

Following the announcement by the Treasury Department that it is ending the myRA program, a number of Democrats in Congress decried the move, including House Democratic Caucus Chairman Joe Crowley (D-NY) and Rep. Keith Ellison (D-MN), the authors of the Making Your Retirement Accessible Act (myRA Act), a bill that would codify into law the myRA program. In a joint statement, the congressmen pointed out that half of working Americans currently do not have access to a retirement plan at work, and nearly two-thirds of workers earning less than $35,000 a year are not saving any money for retirement.

"The myRA program empowers workers to save their own money, in their own account, for their own retirement," Rep. Crowley said. "This misguided decision hurts hardworking families and will take us back to the days when workers faced the often-impossible challenge of saving for their golden years."