By now the term “myRA” has probably been absorbed into the consciousness
of most who serve the retirement industry, and has generated more “buzz” than
any White House proclamation in recent memory.
How are we to react to news of this administration-proclaimed retirement saving experiment? Is it a threat to other tax-favored savings arrangements? Is it a stroke of genius that will fill an unmet need for a segment of the working population? Is it politically motivated, at a time when the administration has been unable to advance its agenda in Congress?
According to a White House fact sheet, a myRA (presumably
standing for “my retirement account”) would allow those without a retirement
plan at work to begin saving in very small amounts in government-backed,
principal-guaranteed accounts. Upon
reaching $15,000, balances would be transferred to a commercial Roth IRA. Ostensibly, there would be minimal fuss for
employers and no risk of loss for employees, at least until a wider selection
of investments became available after transfer to a Roth IRA. It is to be a pilot program, limited to those
whose incomes do not exceed $191,000, and whose employers enroll by the end of
2014.
Many analyses have appeared in the media, some providing more
of the still-incomplete details on this program. It is not my purpose to replicate these
analyses here, or come to any final conclusions on the questions we have raised
above. I do not wish to rush to
judgment; it remains to be seen whether this pilot program really IS different
enough—and sufficiently needed—to serve a genuine purpose as a missing link in
the retirement saving chain. What I
wish to comment on here is the precedent, maybe unsettling to some, this
executive action may represent, creation of a new type of retirement account by
“decree” rather than a thoughtful legislative process.
In my long experience serving and observing the
retirement industry, I can remember no previous presidential act that created
a program of this nature by executive order.
The now-barely-remembered Medical Savings Account, or MSA—since
supplanted by the Health Savings Account—began as a pilot program. But this pilot program was created by Congress. We understand that the current climate in Congress
is resistant, if not actually hostile, to compromise, which makes meaningful
lawmaking very difficult. But that does
not alter the fact that certain functions in our democracy are generally viewed
as the province of the constitution’s lawmakers, the definition of which does
not include the president, or the judiciary for that matter. The question one might ask is even though “authority”
says the President could, should it have been done in this manner. Will this have the stated desired effect of
increasing retirement savings or will it create more division within a
political environment full of strife already.
My concern is not simply one of form, or appropriate roles
under the constitution. The process by
which laws are proposed and passed by Congress is as purposeful as it sometimes
is frustrating. There is a reason why laws
are the product of a process involving the nation’s political parties, and its
two lawmaking bodies—each of which is elected by very different constitutional
procedures. The process gives at least
some measure of assurance that a proposal will be scrutinized, debated, its tax
impact calculated and social impact examined.
A law-in-progress will go through one or more committees that have not
only jurisdiction, but hopefully expertise on the matter at hand. In short, even a new law will have had an
opportunity for refinement, and will have a procedural history that can be of
great importance to interpreting and carrying out its intent.
An executive order, on the other hand, may have few or none
of these things. Certainly it will be
lacking in scrutiny and debate, little opportunity for refinement, and no
history to help in its interpretation and execution. The extensive body of U.S. retirement plan
law and regulations did not have origins as a state-of-the-union surprise. As imperfect as this body of law might be, it
can never be characterized as arbitrary, unilateral, or as legislating by
decree.
Now, as always, I am in favor of giving American workers
any and all useful tools to help them save for retirement. If implemented, I hope the myRA proves to be
such a tool. But I find it hard to ignore
the possibility that its genesis may set a precedent that future leaders may
use as a shortcut or end-run around the proper body—Congress—in which this responsibility
should reside.
