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2017-07-28 15:06:03
Treasury Ends Obama-Era Program to Help Workers Save for Retirement

An Obama-era program that created savings accounts to help more people put away money for retirement is being shut down by the Treasury Department, which deemed the program too expensive.

The 30,000 participants in the program, known as myRA and intended for people who did not have access to workplace savings plans, will receive an email on Friday morning alerting them of the closure. Participants will be informed that they can roll the money into a Roth individual retirement account, the Treasury Department said.

President Barack Obama ordered the creation of these so-called starter accounts three years ago, and they became available at the end of 2015. Since then, about 20,000 accounts have been opened with participants contributing a total of $34 million, according to the Treasury, with a median account balance of $500. An additional 10,000 accounts have been opened but their owners have not made contributions.

Jovita Carranza, the United States Treasurer, said in a statement that demand for the accounts was not high enough to justify the expense. The myRA program has cost $70 million since 2014, according to Treasury, and would cost $10 million annually going forward.

The goal of myRA — which operated much like a Roth I.R.A. — was to encourage saving, particularly among lower-income workers. Workers were able to contribute up to $5,500 a year, or $6,500 if they were 50 or older. The money could be deducted automatically from their paychecks, or they could contribute to the accounts by directly transferring funds from a checking or savings account.

The myRA program was deemed a conservative way to save because account owners could not lose money, though they would not see the potential returns that come with a diversified portfolio of stocks and bonds. The funds were invested in United States Treasury savings bonds, which paid the same variable rate as the Government Securities Fund, available to federal employees through the government retirement plan.

There was no minimum deposit and no fees. But the maximum workers could save was only $15,000, at which point the balance would be rolled over to a retirement account in the private sector.

This month, a group of Democrats in Congress wrote a letter to Steven Mnuchin, the Treasury secretary, asking the department to demonstrate its support of the myRA program.

“Given that this administration has worked to reduce access to retirement plans for millions of Americans, it is more critical than ever for the Treasury to strengthen one of their remaining options for retirement savings,” said the letter.

The letter was referring to the reversal of two rules that would have made it easier for states to create retirement savings programs for workers who did not already have access to employer-sponsored savings plans.

Several states — including Oregon, California and Illinois — are still moving ahead with those plans. And while some states had plans to include myRA as a “safe” investment alternative, that will no longer be an option.