The accounts, which Obama announced Tuesday in a State of the Union Address that concentrated on expanding economic opportunity, will be available to workers who don’t have access to a 401(k) plan, administration officials said.
The “MyRA” accounts, similar to an individual retirement account, will provide “a new way for working Americans to start their own retirement savings,” Obama said in the text of the speech released by the White House.
Under the initiative, workers would be allowed to have a portion of their pay deducted for deposit into an account invested in U.S. government bonds that would be treated for tax purposes as an individual retirement account, administration officials said.
The accounts, set up through the Treasury Department, would have a maximum balance after which money would have to be rolled over into an IRA, the officials said.
The officials project that millions of Americans will take advantage of the savings accounts.
“This isn’t earth-shattering stuff,” said Brian Graff, the chief executive officer of the American Society of Pension Professionals & Actuaries. “But it is a step in the right direction to get more people saving for retirement, which I would think is a bipartisan issue.”
Obama can establish the savings program under existing executive authority without new legislation, the officials said. He will announce details of the plan Wednesday.
“I don’t expect this to get a lot of pushback,” said Graff, who discussed the proposal in advance with Treasury officials. He said it draws on an existing program that permits workers to purchase U.S. savings bonds through payroll deductions and adds “a retirement twist.”
The proposal resembles an earlier Obama administration plan that would have required employers to offer an automatic IRA option to employees. That plan, which was included in Obama’s 2014 budget, would have cost the government an estimated $17.6 billion in foregone revenue over 10 years.
About 68% of U.S. workers had access to retirement benefits as of March 2013, with 54% participating, according to the Bureau of Labor Statistics.
“Although we don’t have the details yet, Vanguard is generally supportive of expanding savings opportunities for those not covered by a workplace retirement plan,” Linda Wolohan, a spokeswoman for Vanguard Group Inc., said in an e-mail.
Wolohan declined to comment further before hearing the specifics of Obama’s proposal. Vanguard was the second-largest manager of 401(k)-type assets in 2012 behind Fidelity Investments, according to researcher Cerulli Associates.
Fidelity, which is also the largest provider of IRAs, declined to comment before hearing the speech, according to an e-mail from spokeswoman Eileen O’Connor.
JPMorgan Chase & Co. (JPM), which manages retirement assets and administers plans, declined to comment before seeing more details, Gregory Roth, a spokesman for the bank, said in an e-mail.