Pub. 4 2014-2015 Issue 6

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S May • June 2015 21 Employer Involvement Under the myRA program, contributions only can be made through payroll deduction and direct deposit by an employer, but the Treasury’s my RA website states that it is “working hard onmaking other contributionmethods available.” The Treasury did not elaborate on what these methods might be. Individuals sign up online for a my RAs and work with their employers to authorize and set up the direct deposit. While employers are not required to offer direct deposit to my RAs, the Treasury is encouraging employers to offer this option to employees who are not eligible for or do not have available to them an employ- er-sponsored retirement plan. Because of the employer involvement, the Department of Treasury submitted a request to the Department of Labor (DOL) to review whether the my RA program is subject to Title I of Employee Retirement Income Security Act (ERISA). The DOL responded in a letter to the U.S. Department of the Treasury stating that—at least for now— my RAs are not subject to Title I of ERISA. My RA Investment The Department of Treasury issued final regulations in December 2014 governing the new retirement savings bond cre- ated for the my RA program. This new nonmarketable Treasury security was created specifically for my RAs, and will earn the same variable interest rate previously available only to federal employees invested in the federal Thrift Savings Plan’s Govern- ment Securities Investment Fund (G Fund). This fund had an average annual return of 3.39 percent over the 10-year period from December 2003 to December 2013. Aggregated IRA Contribution Limits The “Master Terms of myRASM Custodial Account” docu- ment states that the my RA contribution limit is aggregated with any other IRA contributions made that same year. The IRA rules require that IRA owners aggregate all contributions to Tradition- al and Roth IRAs for purposes of the annual IRA contribution limit, and this includes myRAs because they are Roth IRAs. For example, if an individual under the age of 50 contributes $1,000 to his my RA for 2015, he could only contribute $4,500 to another Roth or Traditional IRA. Financial organizationsmust be aware of this aggregated lim- it because their clients may have questions on how contributing to a my RA affects their contributions to other IRAs. Portability Portability is one area that financial organizations will see the most cross-over to other Roth IRAs. Individuals may transfer their my RA assets to another Roth IRA at any time. They also may distribute themyRA assets, and if eligible, do a rollover con- tribution to another Roth IRA. As noted earlier, an individual’s my RA will be terminated when the balance reaches $15,000 or after 30 years if earlier. As stated in the my RA terms, if the owner does not take action to distribute or transfer the assets at that time, Comerica will act as the attorney-in-fact to establish a Roth IRA for the individual and will transfer the myRA assets to it. One of the product specific limitations under the my RA pro- gram is that rollovers to myRAs generally will not be accepted. The my RA terms document explains that the only exceptions to this are certain incidents of death or divorce, and only if the beneficiary or former spouse has a my RA. Financial organizations should be aware that the rollover rules for Roth IRAs apply to my RAs as well. Any distribution from a my RA would have to be rolled over within 60 days of receipt. Also, the one per 12-month rollover rule applies. With the new IRS interpretation effective January 1, 2015, IRA owners can roll over only one IRA distribution from any of their IRAs in any 12-month rolling period. So for example, if an individual rolls over one my RA distribution to a Roth IRA, it disqualifies him for a subsequent rollover from any type of IRA (Traditional, Roth, or SIMPLE) for 12 months from the date the my RA distri- bution was received. There are no restrictions on the number of transfers that can be done. The specific documentation that Comerica will accept or require to facilitate a transfer to other Roth IRAs is unknown at this time. Information on procedures may become available to individuals after they establish a my RA, and any required procedures should be discussed with the financial organization that will accept the assets. Because rollovers to IRAs require written elections, clients who wish to roll over my RA assets that have been distributed to them should complete a contribution form indicating they are requesting a rollover contribution. Clients also must determine their eligibility for an IRA rollover, and this often can be addressed when completing a contribution eligibility form. The Treasury states at the my RA website that it will be pro- viding more information on rollovers to the private sector. At the time of this writing, no additional information was available. Death Distributions The general Roth IRA beneficiary distribution rules apply to my RAs, and financial organizations have the potential to capture these assets if the beneficiary chooses to move the my RA assets to another Roth IRA. Beneficiaries may direct how they wish their inherited my RA assets to be distributed. According to the my RA terms, if there is a balance in the my RA account after the owner dies and the ben- eficiary is the spouse of the deceased, the my RA will be deemed the spouse’s account or the spouse beneficiary can transfer the inherited assets to her own my RA or to another Roth IRA. If the spouse is not the sole beneficiary or the beneficiary is not a spouse, the my RAwill be distributed over the beneficiary’s life expectancy or by the end of the fifth year after the date of death. Presumably, a nonspouse beneficiary may ask that the inherited assets be transferred to an inherited Roth IRA. The my RA terms further state that if there is no beneficiary listed, the estate is the beneficiary.  *This article originally appeared in Ascensus’ newsletter, The Link, in March 2015. About the Writer Trish Reilley is a Copy Writer in Ascensus’ Communications department and has worked for Ascensus for 11 years. She received the CIP designation in 2008 and the CISP designation in 2009. She enjoys writing on various IRA and HSA topics. About Ascensus Ascensus is the largest independent retirement and college savings services provider in the United States, helping over 6 million Americans save for the future. With more than 30 years of experience, the firm partners with financial institutions to offer tailored solutions that meet the needs of financial professionals, employers, and individuals. Ascensus specializes in recordkeeping, administrative, and program management services, supporting over 40,000 retirement plans and 3 million 529 college savings accounts. It also administers more than 1.5 million IRAs and health savings accounts. For more information, visit www.ascensus.com .