State-run retirement program may massively expand federal equivalent

State officials in charge of implementing a new state-run retirement program are considering using the federal MyRA program temporarily, which would be a big boon to President Barack Obama’s struggling initiative.

The MyRA program is one of a few possibilities being considered by the California Secure Choice Retirement Savings Investment Board, along with Treasury securities, to be used for up to three years as the state’s program develops.

Last month, Gov. Jerry Brown signed Secure Choice into law, which will automatically enroll Californians who lack access to employer-provided retirement plans in the state-sponsored Secure Choice Retirement Savings Trust, unless they opt-out.

It’s estimated that around seven million Californians would be eligible for the program, and while the law doesn’t go into effect until January 2017, it’s expected to take a few years to work out the details. 

In the interim, the nine-member California Secure Choice Retirement Savings Investment Board, which is chaired by the state treasurer, is considering using the federal government’s MyRA program.

MyRA

During the 2014 State of the Union address, Obama introduced MyRA as a low-risk, low-return, starter investment account. The program was launched last year, but has since only enrolled 15,000 accounts nationwide, according to Reuters.

California is expecting to have 1.6 million participants in its first year, worth $3 billion in assets, making this a massive expansion of MyRA — if that’s the option the Secure Choice Board pursues.  

MyRA is similar to Secure Choice in theory, both would likely be Roth IRAs in low-risk investments with no outside contributions.

But there are some major differences. Secure Choice is automatic, MyRA is not. MyRA also has a $15,000 cap while Secure Choice has no limit. Once that limit is reached, the individual is encouraged to transfer to a private account. MyRA is meant to be temporary — a starter plan. Secure Choice is not. 

“Secure Choice accounts will have no limits other than the contribution limits for Individual Retirement Accounts that already exist in the Internal Revenue Code,” said Grant Boyken, deputy treasurer for retirement security and health care. “Secure Choice accounts are intended to be portable and to potentially follow workers from job to job throughout their career.”