(USA TODAY) -- The Trump administration said Friday it’s shutting down an Obama-era program aimed at encouraging low- and moderate-income households to save for retirement because the scant participation doesn’t justify the cost.
About 30,000 Americans have contributed a total $34 million to the program, called myRA, which launched in late 2014 as an option for households that didn’t have access to an employer-sponsored retirement plan, such as a 401k, the Treasury Department said. About 20,000 accounts have a median balance of $500, and the owners of 10,000 accounts made no contributions.
It has cost $70 million to manage the program — including server costs and promotion — which was likely to cost an additional $10 million annually going forward, the Treasury said. “Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program,” U.S. Treasurer Jovita Carranza said in a statement. “Fortunately, ample private-sector solutions exist, which resulted in less appeal for myRA.”
Participants were notified by email this morning that the program will be phased out over the next few months, the Treasury said. They’ll receive information about moving their savings to a Roth IRA. A Roth IRA, unlike a traditional IRA, makes contributions with after-tax dollars, but withdrawals are tax-free.
Under the program, contributions were invested in U.S. Treasury savings bonds rather than a portfolio of stocks and bonds that typically yield higher returns over time. Workers could contribute up to $5,500 a year, or $6,500 for those 50 and older. A maximum of $15,000 could be contributed; at that point, the money would be rolled over to a private-sector retirement account.
This month, Democratic senators sent a letter to Treasury Secretary Stephen Mnuchin urging him to keep and promote the myRA program. It noted that this year, Congress rescinded two rules aimed at making it easier for states to create their own retirement savings programs for private-sector workers.
“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,” the senators wrote. They included Sen. Patty Murray, D-Wash., ranking member of the Senate HELP committee and Sen. Ron Wyden, D-Ore., ranking member of the Senate Finance Committee.
The Trump administration has taken aim at other Obama-era consumer-friendly finance regulations as well. The Education Department rescinded a rule allowing student loan borrowers to apply for forgiveness if they were defrauded by for-profit schools. The Labor Department delayed implementation of key parts of the “fiduciary rule” that requires financial advisers to act in their clients’ best interest.
Last month, the House voted for an administration-backed bill that would dismantle much of the Dodd-Frank financial changes aimed at preventing another financial crisis. Among other things, the legislation would weaken the Consumer Financial Protection Bureau by funding the agency from congressional appropriations.