Treasury final regs establish myRA accounts, DOL says myRA not covered by ERISA

The Treasury Department has issued final regulations that establish the myRA program in response to President Obama’s directive to the Secretary of the Treasury to develop a retirement savings security focused on new and small-dollar savers (see Pension Plan Guide Newsletter Report No. 2027, February 10, 2014).

The myRA, a Roth IRA, is available to individuals eligible to contribute to a Roth IRA under Code Sec. 408A. This new product will invest in a new nonmarketable, electronic Treasury retirement savings bond, which will be available only to myRAs. There will be no fees to open and maintain a myRA, and, because a myRA account can invest only in the myRA Treasury retirement savings bond, the account will never lose value (except as a result of withdrawals). In addition, the assets in the account can be rolled over at any time to a private-sector Roth IRA and will be rolled over when the retirement savings bond matures after 30 years or once its total value reaches $15,000.

Under the regulations, the Bureau of the Fiscal Service of the Treasury Department is responsible for administering the program and for issuing the retirement savings bonds to the designated Roth IRA custodian. Communications concerning transactions involving an individual’s Roth IRA should be directed to the designated Roth IRA custodian. The final regulations are effective December 15, 2014.

MyRA not covered under ERISA Title I

The Department of Labor was asked by the Treasury Department whether the myRA program was covered under Title I of ERISA and whether an employer would be establishing or maintaining an “employee pension benefit plan” within the meaning of ERISA Sec. 3(2) by facilitating and encouraging participation by employees through payroll withholding contributions in the myRA program.

The DOL noted that, initially, employees can make contributions only via payroll deduction, and that it understood that the Treasury Department does not, at this stage, intend for employers to implement automatic contribution arrangements (also known as automatic enrollment) unless the employee affirmatively elects otherwise. Under the myRA program, employers will provide employees with information and enrollment and election forms made available by the Treasury Department or Treasury’s financial agent. Some employers that do not offer a retirement plan or that have employees who are ineligible to participate in an employer-sponsored retirement plan might want to more actively encourage their employees to set up myRA accounts, according to the DOL. Until the program is expanded, in order for an employee to make contributions to a myRA account, the employer must agree to forward the employee’s payroll deduction contributions. Employers will also be expected to cooperate in processes or procedures that Treasury or its financial agent establishes to ensure that employee withholdings are properly remitted. Employers will neither administer the accounts nor contribute to them.

The DOL stated that it did not believe that 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 Title I of ERISA, which were established to ensure that employees’ expectation of a promised benefit would not be defeated through poor management by the plan sponsor and other plan fiduciaries. Therefore, given the character of the program, especially the absence of any employer funding or role in its administration or design, the DOL “is of the view that an employer would not be establishing or maintaining an `employee pension benefit plan’ within the meaning of section 3(2) of ERISA based solely 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.”

Source: Treasury Department final regulations, 79 FR 74023, December 15, 2014, DOL Information Letter, 12/15/2014.

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