Following up on a State of the Union pledge to use executive powers to push through priorities, President Barack Obama will issue an order Wednesday afternoon to create a program that gives workers another option for retirement savings.
The myRA program, a play on words with the popular IRA accounts, allows full-time and part-time workers who don't have access to employer-provided retirement plans to approximate that.
Employers will be encouraged to adopt the myRA for their workers since it will only involve a payroll deduction like is already done for Social Security and Medicare contributions. Companies are not asked to match their worker's contribution.
The Treasury Department will manage the program, and expects to reach out to 30 or more financial firms for bids to operate the program. The accounts created will function like Roth IRAs, or individual retirement accounts, where contributions are not tax deductible but there is also no penalty for withdrawal.
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"When people start saving they get into the habit of saving," Treasury Secretary Jacob Lew told reporters aboard Air Force One, accompanying the president to Pittsburgh.
A senior administration official, who briefed reporters on the plan under White House rules of anonymity, said the plans will be portable and can move between employers, and can be rolled into private retirement plans such as a company sponsored 401 k plan if the account holder lands a better job. It will be available to all families with incomes below $191,000.
"We currently have a (retirement) system that is not doing everything it needs to do," said another senior official in the briefing, citing statistics that show that half of all workers lack a company-provided retirement plan as do 75 percent of all part-time workers.
The administration declined to provide an estimate on how many workers it sought to enroll, or how many employers. A pilot version of myRA is expected to begin late this year.
Asked if self-employed workers or individuals could take part in the myRA program, an official said only that "no decisions have been made on that point."
The money set aside by workers can only be invested in government securities, which tend to have lower returns than the stock market but are guaranteed not to lose ground.
In theory, the program is not terribly different than President George W. Bush's proposal to let workers divert part of their Social Security contributions into private accounts that over time could make more money than their expected Social Security benefit.
Democrats fought off the Bush effort, and while their plan offers lower, safer returns both parties ostensibly sought the same objective, getting lower and middle-income workers to set aside more for retirement.
Groups that fight to preserve Social Security had subdued reaction to Obama's idea of myRA.
"While we support proposals that encourage independent savings strategies, the surest and most time-tested path to economic security for older Americans is through the Social Security program," Max Richtman, president of the National Committee to Preserve Social Security and Medicare, said in a statement.