“MyRA” – My Retirement Account
Published:Manager, Employee Benefit Services
In his January 28, 2014 State of the Union Address, President Obama announced the creation of the new “MyRA” or My Retirement Account. This new retirement vehicle is intended to provide a retirement plan for employees whose employers do not offer a retirement plan. According to the White House, approximately half of all American workers do not have access to employer-sponsored retirement plans such as a 401(k) plan.
The basic features of the MyRA seem attractive at first glance:
Payroll deductions into an IRA – employers without any other retirement plan will be required to provide payroll deduction to an IRA account. However, without automatic enrollment, experts don’t expect participation to be any better than in traditional retirement accounts.
Guaranteed investment returns – the only investment option is Treasury Bonds. It’s not clear whether contributions will be placed in separated accounts for each individual or in a general trust fund similar to Social Security. And while Treasury Bonds won’t lose money, they won’t necessarily keep up with inflation.
No fees. The government will be footing the bill for these accounts. Okay, there’s no downside to this one.
Contributions will be after-tax dollars. Similar to a ROTH IRA. So why not just start a ROTH IRA? Any bank or investment firm will be happy to set one up for you. The MyRA has a $15,000 limit, at which time the account must be moved to an actual ROTH IRA. Assets are no longer guaranteed and now the employee must pay fees.
Existing retirement plans already offer most of these options. So why don’t more small business owners offer a retirement plan to their employees? The benefits are many:
– Tax deferred savings for employees
– Tax deductible contributions for the employer
– Tax Credit for startup costs
– Flexible plan design options
– Contributions via payroll deduction
– Mutual fund options otherwise unavailable to individual small investors
While the MyRA plan is well-intentioned, there are better options. The key to a successful retirement plan is making sure employees take advantage of it. Contact us to determine which retirement plan is best for you and your employees.
According to the Government Accountability Office, “only 14 percent of businesses employing 100 workers or fewer sponsored some type of savings retirement plan; among employers with one to four workers, only 5 percent offer retirement savings plans.”
Contact:
Stacey L. Spencer, QKA |Manager, Employee Benefit Services | 317-260-4421 | sspencer@greenwaltcpas.com