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The Treasury Department recently released Q&As concerning its upcoming myRA program, which was first introduced by President Obama in his State of the Union address in January.
The myRA program is intended to facilitate retirement saving by workers who lack access to an employer-sponsored retirement plan — either because the employer does not sponsor one or because the employee is ineligible for the employer’s existing plan. The program is designed to encourage participation by individuals at lower to moderate income levels.
Accounts will have no fees and may be opened with an initial deposit of $25. Thereafter, employees may elect to contribute as little as $5 through automatic payroll deduction.
All deposits will be added to the value of a single security, which will be backed by the U.S. Treasury. This security will earn interest at the same variable rate as the Government Securities Investment Fund in the Thrift Savings Plan set up for federal employees.
Any employee who wishes to place his or her money in investments besides the government-backed security may — at any time — roll over the account balance to a private-sector retirement account.
Participants must roll over a myRA balance to another retirement account once it reaches $15,000 or after the account has been open for 30 years — whichever comes first.
For tax purposes, myRAs will function as Roth IRAs. Therefore, contributions will be made after tax, but distributions — including earnings on the employee’s contributions — will be tax free, provided the account has been open for five years and the employee is at least age 59½. Additionally, the employee’s contributions may be withdrawn tax free at any time.
MyRAs will also be subject to the same income eligibility limits as Roth IRAs. For 2014, eligibility to contribute to a Roth IRA phases out at the following levels of modified adjusted gross income (subject to inflation): $181,000 to $191,000 (married filing jointly), $114,000 to $129,000 (single and head of household), and $0 to $10,000 (married filing separately).
Employers will not be required to make myRAs available to their employees. Those employers who choose to participate will need — at the start of the program — to make myRA information available to their employees. However, employers will neither administer the accounts nor make employer contributions to them. Likewise, employees will be responsible for complying with the income limitations for making contributions.
If you have questions over the new myRA program, or for tax assistance contact our tax advisors in Michigan, Houston or Ft. Lauderdale.
Source: U.S. Treasury
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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