Opinions September 9, 2014

Why You Should Get to Know myRA

September 9, 2014 (PLANSPONSOR.com) - Have you been introduced to myRA? With her upcoming debut expected in late 2014, you may wish to get acquainted with her key features now.
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Introducing myRA (pronounced my-R-A), a new retirement savings program for savers who do not have access to an employer sponsored retirement savings plan, such as a 401(k) or 403(b). We encourage you and your employees to understand this new savings program. It provides a benefit to both the employer and employee, with no fees and little effort. 

The employee simply signs up online for a myRA and you, the employer, take the payroll deduction and automatically deposit it with the Treasury. It’s that simple! For employees who have not yet met the eligibility provisions of your plan, this is a great retirement savings plan for them. Do you have long term “part-time” employees that will never be eligible for the plan? This could be just the thing to get them to save towards a more comfortable retirement. It’s a win-win.

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In his 2014 State of the Union address, President Obama announced that the U.S. Department of the Treasury was developing a new way for workers to start saving for the future. The myRA (“My Retirement Account”) program offers a new retirement savings account for individuals looking for a simple, safe, affordable way to start saving.

Key features of myRA include:

  • Initial contribution of at least $25 and automatic ongoing contributions of $5 or more every payday;
  • myRAs are available to any individual with an annual income of less than $129,000 or a couple with annual income of less than $191,000;
  • Account will never go down in value and there are no fees;
  • A retirement savings bond with the same variable interest rate as a low risk investment option available to federal government employees;
  • It’s portable – not tied to a single employer;
  • Rollover to a private-sector provider at any time;
  • Build savings for 30 years or $15,000, then transfer to a private-sector provider; and
  • myRAs are Roth IRAs with Roth tax advantages (taxes are paid up front, not at distribution).

You can learn more about myRA by visiting www.treasurydirect.gov/readysavegrow or calling (800)553-2663. In addition, Treasury has available a FAQ, fact sheet, and infographic.

Barbara Klein, QPA, QKA is the founder of 401kEssentials.com and President of Accrued Benefit Administrators, Inc. She has more than 35 years of experience in the retirement plan industry as an administrator, educator, speaker and author. Drawing from her experiences in the pension administration industry, Klein is the author of 401(k) ESSENTIALS For The HR Professional. She is credentialed by the American Society of Pension Professionals & Actuaries (ASPPA).    

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author(s) do not necessarily reflect the stance of Asset International or its affiliates.
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Ask the Experts September 9, 2014

(b)lines Ask the Experts – 457 Deferrals and Plan Limits

September 9, 2014 (PLANSPONSOR (b)lines) – “I have a new employee who contributed to the retirement plans of his prior employer, which maintained plans similar to ours.
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“I know what to do when an employee contributes to a 403(b)/401(k) at a prior employer; his dollar limit to our 403(b) is reduced by the amount of his deferral to the plan of his prior employer. But, what about 457(b) deferrals? I know that they do not affect the ability to defer to a 403(b) plan, but we also have a 457(b) plan to which this employee wishes to contribute. Does the amount he deferred to the 457(b) of his previous employer reduce the amount he may defer to our 457(b)? If it makes a difference, the employee’s prior employer was a public university, and we are a private university.”  

Michael A. Webb, vice president, Cammack Retirement Group, answers:

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First of all, the Experts commend you for making certain that you take into account deferrals to retirement plans of a prior employer. Too often, employees who change employers mid-year do not find out that deferral limits span multiple employers until it is too late.

And yes, though the 402(g) limit does not apply to 457(b) plans, there is a similar provision of the Code Section 457 (457(c)) that limits deferrals to 457(b)s of multiple employers in the same year to a single dollar limit ($17,500 in 2014, same as the 402(g) limit). Thus, deferrals made to the prior employer’s 457(b) will indeed reduce the amount that the employee may defer to the 457(b) plan that you sponsor. 

In your particular employee’s situation, if he or she is age 50 or older, the employee may have been able to defer an additional $5,500 to his/her prior employer’s plan under the age-50 catch-up election; such an election is not permitted in your plan, since your plan is not sponsored by a governmental entity. Otherwise, the fact that one plan is governmental and one is not has no impact on the contribution limit.

In addition it should be noted that, unlike in a 403(b) plan, employer contributions to a 457(b) plan are also considered to be deferrals that count against the 457(b) limit. A single $17,500 limit in 2014 applies to all contributions to 457(b) plans of multiple employers, whether contributed by the employer or employee.

Thank you for your question!

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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