Thirty-seven minutes into his fifth State of the Union in January 2014, then-President Barack Obama announced the creation of a new federal program to help working Americans save for retirement. The new program would be called myRA, and the idea was to patch one of the biggest holes in the American safety net: Most Americans who should be building a nest egg for retirement simply don’t have one.

“A Social Security check often isn’t enough on its own,” Obama said. “And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s.” His idea was to create a risk-free, government-administered savings account that any American could start easily.

His announcement came as a surprise even to Washington’s retirement wonks, watching from offices, bars and living rooms. The American retirement crisis was, and is, a topline worry for many policymakers, but they hadn’t been briefed on any plan, or even heard of the myRA. “It came up in the State of the Union speech with almost no heads-up,” said Justin King, a longtime retirement-policy specialist at New America. Congressional Democrats appeared just as blindsided: They didn’t stand up and applaud during that portion of the speech. In fact, even Obama initially mispronounced the name of the program in his address. (He said “my-IR” before catching himself and saying “myRA.”)

The stakes were high, and still are: Millions of Americans are unprepared for retirement, a problem expected to grow as employment becomes less stable and workers are increasingly responsible for their own savings. His attempt at a fix, the national myRA program, officially launched in November 2015. It survived less than two years.

On July 28, 2017, the Treasury Department, now led by Secretary Steven Mnuchin, quietly announced that it was shuttering myRA, saying it was too expensive to run, and too few people had signed up. In the 20 months the program accepted new accounts, just 30,000 people had started one.

What went wrong? The myRA wasn’t just another minor Democratic policy idea killed by Trump. It was Obama’s most substantive effort to address the coming retirement crisis, an idea with deep bipartisan roots announced in the White House’s most-watched speech of the year. Despite its surprise rollout, it was initially a high priority at Treasury. With Congress showing little interest in any significant reforms to Social Security or other retirement-savings ideas, myRA seemed like a rare chance for Washington to help save Americans, especially younger ones, from spending their senior years in poverty.

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The story of myRA’s demise is in part politics, of course, but it also speaks to the difficulties Washington faces in solving a vast public problem with the modest levers available to the government in pushing private-sector solutions.

New research from Boston College finds that millennials—already the largest generation in the American workforce—are far less likely than previous generations to participate in an employer-sponsored retirement plan during their 20s and 30s, key working years for building up a nest egg. They also have higher levels of student debt, are less likely to own a home and are expected to live longer than their parents or grandparents. And they also are less able to rely on Social Security: The program will face automatic benefit cuts in 2034, unless Congress takes further action to cover the shortfall.

The myRA wasn’t anything like a silver bullet. But it was a tool for more Americans to build their own nest eggs—and because it was voluntary, built on private-sector solutions, Obama officials expected it could survive a future Republican administration. “We didn’t think, even after the election, that the new administration was likely to reverse course on the myRA because it’s a good, bipartisan idea, largely suggested and supported by the financial services industry,” said Mark Iwry, a former senior Treasury official who was the godfather of the program.

That assumption proved wrong. But the idea may still prove important, as could the lessons of its failure. Five states have embarked on plans similar to the myRA, with an extra push the original didn’t include: Private-sector employers in those states that don’t offer a workplace retirement plan will be required to autoenroll their workers in a state-run IRA. These plans amount to one of the most ambitious and controversial reforms to the federal retirement system in decades, and a crucial experiment in patching that hole in the net—if they can avoid the fate of the myRA itself.

President Barack Obama used his 2014 State of the Union address to unveil “myRA,” a plan designed to help workers save for retirement even if their employers didn’t sponsor a savings plan. The Trump administration ended the program in 2017. | Getty Images

THE myRA WAS never Obama’s preferred solution to the retirement crisis.

Instead, he favored something more direct and heavy-handed: a new law creating a national auto-enrollment program, which would mandate that all employers enroll their workers in a retirement savings plan, such as a 401(k) or IRA. People wouldn't be forced to save money—workers could opt out and keep the money in their pockets—but the Obama administration expected that many would stay in the program. Behavioral science research suggests that one of the biggest reasons people don’t save money is simple inertia: If you aren’t contributing to an account now, you aren’t likely to start tomorrow. But if you’re automatically enrolled, you’ll just keep saving without even thinking about it.

The auto-enrollment proposal never got much of a hearing on Capitol Hill, even though Sen. John McCain (R-Ariz.) supported the idea during his 2008 presidential campaign. Republicans weren’t interested in working with Obama on just about any legislation, while Democrats were wary of pushing another mandate after they controversially included an insurance mandate in the Affordable Care Act. Obama kept proposing an auto-enrollment plan—he included it in all eight of his budgets—but it was clear early on that it wasn’t going anywhere as a national policy.

By 2014, Obama was well into his second term and his administration had done little to fix the great American retirement shortfall. “President Obama proposed auto-IRA for many years, and it got embarrassing,” said a former senior Obama administration official. “Retirement security is a big deal and we were getting nothing done.” It was time to get creative.

Iwry and David John, a retirement expert at AARP, had conceived of a myRA-like product many years earlier. It had impeccable conservative credentials: John had worked at The Heritage Foundation, and it comported with the basic idea that retirement planning should be voluntary and rely much less on government support than on the private sector. Now, with Obama looking for a new idea and Iwry ensconced at Treasury, the administration dusted off the myRA and made the surprise announcement during Obama’s 2014 State of the Union address.

If there is anything worth knowing about the myRA, it is this: It was designed to be as inoffensive—to workers, employers and the financial industry—as possible. The idea was to offer Americans a low-cost retirement savings account with extremely low risk, something that would appeal to low-income people who were nervous about investing in the stock market, especially after the financial crisis, and allow them to access their money in an emergency without facing the tax penalty that comes with early withdrawals from a 401(k). The government would administer the account by contracting with a private-sector bank. The myRA was principal-protected, so account holders couldn’t lose money, and since it was structured as a Roth IRA, with contributions deposited after-tax, workers could withdraw their money without a penalty.

The myRA, while available to people without jobs, was also designed to work through the employer system. But employers didn’t have to worry about the overhead: Since they weren’t managing or contributing to the accounts, the program wouldn’t be subject to the costly federal rules surrounding 401(k)s. Those rules, including lengthy disclosure requirements and the legal liability that comes with fiduciary responsibility, significantly discourage small businesses from offering workplace retirement plans. Since Treasury was offering the myRA, administrative costs on employers would also be low.

And Treasury capped accounts at $15,000, at which point account holders were encouraged to roll their money over into a private-sector IRA. This was designed to garner support from the financial industry, which could earn a lucrative new source of assets to manage if the myRA succeeded.

Best of all, Treasury didn’t need new legislation to implement the myRA. It could all be done within its authority to issue savings bonds.

However, the myRA also came with some significant downsides. Since it needed to be extremely safe, the money would be invested in Treasury bonds, earning barely more interest than a savings account—making the account a poor vehicle for actually building up retirement savings. Workers also couldn’t receive employer contributions. Treasury was well aware of these shortfalls, which is why it didn’t see the product as a long-term retirement savings strategy. It was a starter account—purely an on-ramp, something to get people over the huge hurdle from $0 to $1, and then to $15,000—at which point, they could start developing a more sophisticated personal investment strategy.

“We said to the industry that when an account gets to a size where the economics are attractive to you, they should roll it into a private sector IRA,” said Mary Miller, former acting deputy secretary of the Treasury. “We aren’t trying to compete with you, but rather help small savers that you don’t currently serve. And maybe along the way we could provide some education, financial literacy and get people ready to be investors.”

Said Iwry: “It’s simply a starter account. The government is not intended to be a long-term provider of the savings vehicle but merely an incubator, to fill the gap until the savings are no longer so small that the private sector is unable or unwilling to manage them.”

In November 2015, the Obama administration officially launched myRA, the beginning of what it believed would be a long-term government program. But the program didn’t have an advertising budget, which meant Treasury had little ability to promote the product, outside of press calls and news releases that didn’t attract much attention. By then, the news from Washington was already dominated by the chaotic 2016 presidential election. There wasn’t much room for coverage of a technocratic retirement-savings program.

Enrollment was slow from the start and never took off. By July 2017, when the Trump administration officially killed myRA, just 30,000 people had signed up for an account, and 10,000 of those accounts had a balance of $0. According to Treasury, the agency spent $72.4 million on the program by the end of fiscal 2017; participants had just $34 million in their accounts. It was supposed to leverage modest federal spending into a big savings boom. Instead, based on the start-up costs and low enrollment figures, it would have been more cost-effective to just hand Americans the cash directly.

Going forward, the agency projected that it would cost $10 million to manage myRA each year, higher than expected. Without an influx of new accounts, the costs to maintain the program would exceed the increase in savings.

Supporters counter that myRA was never given a chance to succeed. Few workers signed up for 401(k)s in the first few years of its existence, they argue. Without a marketing budget, they said, Treasury had little ability to inform the public about the program, such as an idea from Miller for Treasury to launch a new savings bond poster competition, modeled after similar posters created after World War II. Given time and increased attention, Obama officials expected enrollment to rise, perhaps significantly, in the near future.

“We certainly didn’t think this long-term investment in expanding saving could be evaluated after only one year,” said Iwry. “By that logic, they would have canceled the 401(k) before it hit its stride.”

The myRA did have an outside chance of survival in the form of state plans: Oregon and California, which were already launching their own state-run auto-IRA plans, considered including federal myRA accounts as an investment option. Those two states alone could have funneled millions of people into the program, giving it the boost it needed to survive.

Asked why the agency cancelled the program with the potential for millions of new participants from the state-based plans, a Treasury spokesperson said in a statement: “The myRA program was a financially unsustainable program that failed to meet its enrollment objectives. While the program was planned to be a low cost, high-enrollment program, it turned out to be a high-cost, low-enrollment program.”

By December of last year, the program no longer accepted new deposits. Treasury is currently working with myRA account holders to roll their money over into private-sector IRA accounts. Just as quickly as myRA was launched, it was gone.

Despite its short lifespan, the myRA offered important lessons for policymakers trying to solve America's crisis in retirement savings. Most notably, it highlighted two ideas increasingly seen as essential to any solution to the retirement crisis: auto-enrollment and payroll deduction. The myRA effectively contained neither: Treasury didn’t have the legal authority to require companies to auto-enroll their workers, and when the department lobbied companies to at least offer the myRA as an investment option for their workers, many companies were, at best, lukewarm about the idea, if not openly hostile. Even nonprofits were skeptical.

Instead of experimenting with those ideas, the myRA effectively tested the argument that there were Americans who wanted a low-risk, low-cost savings product but weren't being served by the existing market. The myRA, since it was invested in Treasuries, was even safer than a traditional IRA, although it came with the $15,000 cap. If Treasury built such a product, would savers come? At least in the myRA’s short existence, the answer appeared to be no.

“The understanding of this approach was if we just gave people a good, safe product, they’d move forward,” said King, the retirement expert at New America. “There’s a lot of understanding in behavioral science and a lot of understanding that we’ve yielded from years of policy change in the retirement savings space that this would always be a hard sell for a lot of people.”

Bill Kuchman/POLITICO

WITH THE DEATH of the myRA, the focus among policymakers has shifted westward to Oregon, which is now running a major, controversial experiment in whether auto-enrollment through a payroll deduction can finally get millions of Americans to save. On July 1 last year, Oregon became the first state to officially require all employers, regardless of size, to offer their workers a retirement savings plan, a new kind of state-run IRA account. The program is in its infancy, but already 37,000 people have the new accounts, surpassing myRA’s total enrollment.

And the Oregon experiment won’t be the last. California, Connecticut, Illinois and Maryland have also established state-run auto-IRA programs, which will launch over the next few years. The details of each state plan vary but they have the same general structure: Employers that don’t offer a retirement plan are required to enroll their workers in a state-run IRA. The state chooses the default investment option, generally through some kind of independent board, and workers can opt out. The idea is to leverage the simplicity and ease of the payroll-deduction system while minimizing the administrative burden and cost for employers.

These plans have triggered significant pushback from Republicans and the financial industry, however, which argue that the state plans lack important consumer protections and could funnel workers into costly products that don’t fit their savings needs. The biggest argument has centered on a 1974 law, the Employment Retirement Income Security Act (ERISA), which was created after a series of scandals around private-sector pensions in the 1950s and ’60s. ERISA imposed a fiduciary duty on employers that manage their workers’ retirement plans, requiring them to act in the best interest of their employees, and also set standards around financial disclosures. These rules are designed to protect workers, but they also discourage small businesses from offering 401(k)s and other, similar savings plans.

The big question for the state programs was whether their auto-IRA plans would be subject to ERISA, and thus force all businesses to abide by the thicket of rules it imposes. In 2016, the Obama administration attempted to clear up that question when the Department of Labor issued two rules—one for states and one for municipalities—that created a new “safe harbor” under which state-run auto-IRA plans were exempt from ERISA. But last spring, the Republican Congress repealed both safe harbors.

The five states, however, were undeterred by the repeals, arguing that an existing 1975 “safe harbor” is broad enough to exempt state-run auto-IRA plans from ERISA.

Republicans frame their opposition to the safe harbor as a straightforward example of consumer protection. Employers sponsoring 401(k)s and states running an auto-IRA program are operating in similar roles, each administering retirement accounts, choosing investment options and providing information to plan participants. Yet employers are subject to ERISA while states are exempt. Republicans ask: Why shouldn’t states, which have a bad record of managing public sector pensions, also be subject to ERISA? “They are put on the same footing with a 401(k). They have an administrator dealing with other people’s money and need the fiduciary protections of ERISA,” Rep. Francis Rooney (R-Fla.) told me last year, when the GOP was set to repeal the DOL safe harbors.

Supporters argue that the states have created laws with their own ERISA-like protections, such as imposing a fiduciary responsibility on the state. “We see that as an added layer of accountability compared to what employer-sponsored plans might offer,” said Katie Selenski, executive director of California’s plan. “Our board is a public board, and we’re public employees. Everything we do is a matter of public documentation. We see a higher level of transparency.”

Supporters acknowledge that a future state could act irresponsibly, creating an auto-IRA program but forgoing state-level consumer protections that Oregon, California and others have included. “Yeah, a state could do something dumb,” said David Morse, an ERISA lawyer who has worked with states on their plans. “It wouldn’t be the first time in the history of the world.” But Morse said a better comparison is to 529 college savings plans, which are state-administered plans with billions of dollars. “Could a state with the 529 plan do something ridiculous? I guess theoretically, but it hasn’t happened.”

Opponents of the state plans also argue that they suffer from the same problems as the myRA: They're expensive to administer and offer a product to workers that prohibits employer contributions. David Abbey, deputy general counsel for retirement policy at the Investment Company Institute, a trade group, added that states were overestimating how many people will enroll in the state plans. “There are some problems with the basic assumptions that are being used to justify these state plans,” he said.

Tobias Read, Oregon’s treasurer, disputed concerns about administrative cost, saying that his state’s program would be budget-neutral, requiring higher initial fees to recoup the start-up costs. Right now, those fees equal about 1 percent of savers’ assets. As participation grows, he said, the state will have more leverage to negotiate lower fees with money managers.

The success or failure of these plans will ultimately come down to consumer participation. Will millions of workers begin newly saving for retirement through the state-run auto-IRA plans? Or will the plans follow a similar path as the myRA, with limited participation that ends up generating high per-person administrative costs? And, most importantly: Will they actually help close the American retirement gap?

So far, in Oregon, 73 percent of potential participants have enrolled in a state auto-IRA. That’s below the 90 percent enrollment rates seen at companies that auto-enroll their employees in 401(k)s, but the program is just getting going: In this initial phase, only employers with 50 or more workers must certify with the state that they are offering some form of a retirement plan to their workers, a 401(k), state-run IRA or something else. The program will expand over time, covering more workers without access to a workplace retirement plan. By May 15, 2020, Oregon estimates that roughly 1 million people will newly have access to a savings plan. If the 73 percent enrollment rate holds, 730,000 Oregon workers will have newly signed up for a retirement account.

Abbey said he’s skeptical that Oregon can sustain that enrollment figure over the long term, arguing that workers will stop contributing or close their accounts once they become aware that they were passively enrolled into a default plan. “Over time,” he said, “we would expect that those participation rates would not be maintained.”

Read brushed off those concerns saying he remains excited about the program, not just to get current workers to start saving but especially for younger ones—millennials who might be reluctant to invest in the stock market but are currently in the years where developing a habit of saving is crucial.

“The thing that gets me most excited is to think about a young person starting their career now and gets into the habit of devoting a portion of the income to savings and what life will look like for them as they approach retirement in 30 or 40 years,” he said. “They may be surprised to find out that they’ve built up an account.”

Danny Vinik is a writer in Washington, D.C., and former assistant editor of The Agenda.

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