Now that the federal government has officially rolled out the myRA retirement savings program, has it also left participating employers open to possible fiduciary liability?
The answer is no — employers who decide to help enroll workers in these new accounts need not fear maurading bands of fiduciary-violation-seeking plaintiffs’ attorneys.
Mark Iwry, senior advisor to the secretary for retirement and health policy at the Treasury Department, wrote the Department of Labor seeking clarification about whether myRA accounts would fall within the jurisdiction of the Employee Retirement Income Security Act of 1974.
Iwry got a response from the DOL in mid-December, roughly in time for the program’s launch. It was a clarification that may be vital to myRA’s success.
“An employer that makes myRAs available by payroll deduction is not responsible for compliance with any of these (myRA program) rules or limits,” the DOL said. “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).”
The government’s hopes for the program are in part dependent on employers’ willingness to communicate the availability of the accounts, which invest contributions deferred from payrolls into a newly created retirement savings bond, similar to the G Fund offered to federal employees through the Thrift Savings Plan.
Treasury has created a host of information and marketing tools that employers can access on the department’s website.
Also read: Comerica to manage MyRA
The individual accounts, styled after Roth IRAs, will be administered by Treasury, which issued final rules on the program in mid-December.
The new government-issued bonds will protect the principal invested and will be subject to the same annual deferral limitations as Roth IRAs – $5,500. But the difference in myRA accounts is that their ultimate value will be capped at $15,000. Once the accounts hit that maximum value, account holders will have to transfer the funds into other investments offered by financial services providers in the private sector.
Critics who feared a stealthy government takeover of the retirement industry may find the language in Treasury’s final rules soothing. It described the program as a “stepping-stone to the broader array of retirement products available in today’s marketplace.”
Without employers’ cooperation, it’s unclear if that intention stands a chance of being actualized.
In his letter to Iwry, John Canary, director of regulation interpretations at the DOL, noted that individuals will invest in myRA accounts through “payroll withholding contributions,” and that employers can encourage enrollment by distributing the pre-packaged information provided by Treasury.
While that may sound like the role of a fiduciary under ERISA, Canary was clear in saying it is not.
“Employers would not make employer contributions to myRAs and would have no investment or other funding obligations, or have any custody or control over account assets,” he noted, adding at another point in his response that:
“We do not believe 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 ERISA.”
And if that wasn’t clear enough, Canary wrapped up with this:
“Given the character of the program, including its voluntary nature, its establishment, sponsorship, and administration by the federal government, and the absence of any employer funding or role in administration or design, the department is of the view that an employer (who helps workers enroll in a myRA) would not be establishing or maintaining an employee pension benefit plan within the meaning of section 3(2) of ERISA.”