Mark Iwry doesn’t like certain descriptions of the now defunct, about-to-be-revived myRA program, a high-profile part of the previous administration’s attempt to help Americans save.
He wants to set the record straight, albeit with an academic deconstruction of critics’ complaints—which makes sense, since he’s a visiting scholar at Wharton, among a long list of other achievements and distinctions.
They include nonresident senior fellow with The Brookings Institution, senior advisor to the Secretary of the Treasury from 2009 to 2017, a former partner in the law firm of Covington & Burling, and former research professor at Georgetown University.
More impressively, and the reason for the interview, was his role as a principal architect and author of the myRA program, announced during President Obama’s State of the Union speech in 2014, only to be discontinued in July 2017.
The Trump administration justified their decision to cancel based on low adoption and high per-account costs incurred by the government, but Iwry doesn’t buy it.
And now, with the myRA set for a possible comeback as part of the Encouraging Americans to Save Act (EASA), Iwry provides important background on the program’s initial rollout, benchmarks and overall purpose.
Specifically, Section 3 of the EASA bill would authorize the Treasury Department to issue rules coordinating the establishment of MyRA accounts as a component of state (and local) government automatic IRA programs that enroll uncovered private-sector workers in private-sector IRAs, something Iwry says was planned since 2016.
While the myRA program’s initial take-up was low, the projected future take-up was actually quite high, he claims.
“What was reported was simply that the Trump Administration looked at the myRA a little over a year after it had launched, and there were only several tens of thousands of accounts that were funded so far,” Iwry explains. “They said too much had been spent relative to the existing takeup, and they canceled it on those grounds.”
But the myRA, he argues, was a long-term investment in national saving, a starter account designed to play out over many years and be used for a variety of purposes—not to be judged prematurely and terminated based on the first year’s activity.
One of those purposes was to support the aforementioned federal or state-based auto IRAs.
At the time, California was about to enact its auto IRA program; the only hold-up was the need to reach agreement on the type of default investment in which participants would be placed.
Rather than delay the program entirely while debating the issue, the California legislation was amended to specify that the everyone who didn’t opt out would be invested in “United States Treasuries, myRAs, or similar investments” at least temporarily for up to the first three years of the program.
So, a major purpose of the myRA, by 2016, was to serve as a key element of the auto-IRA programs in Oregon, Illinois and California, as requested by those states and probably other states in the future (the auto-IRA was also explicitly required to be offered as an option on state “marketplaces” under legislation signed into law in Washington and New Jersey).
“In the first year of the myRA, 2016, our focus at Treasury was mainly on ensuring we had the capacity to meet the very large expected demand from California, Oregon, and Illinois,” Iwry explains. “Far from the supposed low numbers, California officials, in accordance with their legislation, made clear to Treasury that they were interested in using the myRA as their temporary placeholder default investment, or sole investment, for up to three years to auto-enroll 6.8 million workers.”
As a simple, existing investment guaranteed to protect savers from any risk of loss, the myRA was a ready compromise solution; it would not need to be newly designed for this purpose.
“We had extensive discussions in 2016 with Oregon and California, and later Illinois, in which they made completely clear that they wanted to use the myRA. Oregon and Illinois wanted myRA to serve as their safe investment alternative and probably as the temporary safe starter investment that all enrollees would have for the first 90 days or first $1,000 of contributions. That would require tens and potentially hundreds of thousands of myRAs. California went further: in addition to these uses, California officials wanted to use myRA as the temporary investment for millions of workers to transition the program through its first few years while California decided whether their permanent default investment would be a target date fund or something else. “
It meant 6.8 million California workers (minus those who opted out of the program) were expected to be automatically enrolled in the myRA starting in 2018 or early 2019. California’s main concern was to be assured that Treasury had the capacity to make several million myRAs available in that time frame.
“In the last year of the Obama administration, Treasury focused its myRA efforts on preparing for that onslaught of demand.”
Before the election, states had asked Treasury if they could rely on the myRA to be available. As the program was implemented by regulation, not statute, a new administration had the power to cancel it.
“That said, after the 2016 election, the chances seemed good that the myRA would continue; it was good policy, not a partisan effort, and was supported—even originally suggested—by the financial services industry. Other potential uses were contemplated: myRA was starting to be used as a vehicle for saving tax refunds and was being considered as a solution to the continuing problem of dwindling IRA balances due to automatic rollovers of small payouts from 401(k) plans.”
However, in the spring of 2017, the Trump White House and/or Treasury realized (or were told) that continuing to make the myRA available to the states’ auto IRA programs would be inconsistent with their intent to sign legislation hostile to those programs.
So the Trump Treasury then informed California—as well as Oregon and Illinois—that it was pulling the plug “on the states’ plans to promote saving by millions of workings families through myRAs.”
Shortly after thwarting the states, Treasury announced that the myRA’s expected takeup was small and therefore not worth the cost of continuing.
“That’s the real story of the premature demise of the myRA,” Iwry concludes. “It was not the flop they made it out to be. Take-up among those just signing up for it on their own was starting slow, but the key point was that, but for Treasury’s intervention, millions of myRAs were about to be deployed to help working families start saving in California and other states.”