A new government savings tool is allowing small business owners to encourage their employees to start saving for retirement without bearing the cost burden of offering solutions like 401(k)s.


The Treasury Department’s new myRA is a risk-free savings vehicle that’s taxed like a Roth IRA, but has no minimum contribution. It has a better rate of return than a standard savings account, and when the balance hits $15,000, the Treasury Department will roll it over into a private-sector Roth IRA. Enrollees can withdraw their contributions (but not earnings) in case of an emergency. Employees enroll individually, but can contribute through their employers.


The myRA is a great option for employees who work at small businesses that don’t offer 401(K) plans, Andrea Davis writes for Employee Benefit Adviser. “Just 51 percent of workers have a way to save for retirement through work,” writes Jim Gallagher writes for the St. Louis Post-Dispatch, citing the Employee Benefits Research Institute “The smaller the company, the smaller the chances. At shops with 10 or fewer workers, just 13.2 percent are enrolled in a retirement plan, compared to 57 percent at companies employing 1,000 or more.”


The chances of having access to employer-sponsored retirement savings vehicles also go down with compensation, write Lily Batchelder and Jared Bernstein for the Huffington Post: “The fraction is much higher for workers who are low-income (60 percent), part-time (63 percent), or work for a small business (49 percent).” The myRA is a great first step to start people saving, they write.


“Almost a third (31 percent) of non-retirees have no pension or retirement savings whatsoever. The average family nearing retirement only has $12,000 in retirement savings,” Batchelder and Bernstein write. “According to some estimates, more than half of households will be forced to significantly cut back on their spending in retirement … (And) at the same time, more than 75 percent of households do not have enough of a financial cushion to replace three months of income.”


The myRA is particularly useful because employees can fund it in several ways, Richard Eisenberg writes for Forbes. Contributions can be one-time or recurring, he writes.

“The two other ways to fund a myRA: by making direct deposit contributions through your employer or by directing all or a portion of your federal tax refund to the account,” Eisenberg writes.


Small employers should encourage their employees to enroll, Gallagher writes, and the Treasury Department should be educating and encouraging them. “MyRA aims to be low-hassle and free or nearly free for the employer (and) charges no fees to the boss or employee,” he writes. “The employer doesn’t have to contribute to the worker’s account. There is no minimum balance or minimum contribution for the worker. The employee chooses an amount to deduct from each paycheck.”