The US Treasury has announced that it is winding down the “myRA” program started by former President Barack Obama’s administration in 2015 as a retirement savings option for low-income Americans, and that participants will be allowed to roll their money into private Roth IRAs, the New York Times reports:
Jovita Carranza, the United States treasurer, said in a statement that demand for the accounts was not high enough to justify the expense. The program has cost $70 million since 2014, according to the Treasury, and would cost $10 million a year in the future. … The closing of myRA is the latest step taken by the Trump administration to reverse Obama-era savings initiatives and investor protections.
The myRA program was launched by the Obama administration in 2015 to encourage US citizens to save more for retirement. Marketed as a “starter” retirement account for low-income individuals without employer-sponsored retirement plans, myRAs invested in the government securities investment fund and promised no risk of losing money. However, critics of the myRA questioned whether it was really all that useful as a retirement savings vehicle, noting that the fund’s low level of risk meant it also offered very low returns.
According to the Times, although 30,000 Americans opened myRAs, only 20,000 ever contributed to them, with a median account balance of $500 and total contributions amounting to $34 million. Mark Iwry, the chief architect of the program, told the Times the decision to close the program, which took six years to design, after less than two years was shortsighted and “reflect[ed] a fundamental misunderstanding of its purposes and potential as a long-term investment in working families’ economic security and financial independence.”
The closure of the myRA program is the latest step by the Trump administration and the Republican-controlled Congress to wind down the previous administration’s efforts to increase Americans’ retirement savings through federal and state government action. In May, the Senate voted to overturn a rule created by the Obama administration to encourage the development of state-sponsored “auto-IRA” programs by exempting them from the Employee Retirement Income Security Act (ERISA). Auto-IRAs were on the GOP’s radar from the get-go, so the vote to end federal support for them was not surprising.
Several states, including California, Oregon, Illinois, Maryland, and Connecticut, have passed auto-IRA laws, which require employers to either provide a retirement plan for their employees or connect them to a portable, state-run option. Oregon’s program went into effect last month. Other states are looking into other state-sponsored retirement savings programs such as retirement-plan marketplaces or multiple employer plans. While the impact of Congress’s move to withdraw the ERISA exemption from these programs increases the uncertainty of their futures, according to Liz Farmer at Governing magazine, the states that have created these programs all intend to move ahead with them regardless.