401(k) Plans and “my RAs(which are being discontinued)

Should you wait until “full payment” age to receive your first SS check?

(8/7/17)- One of the biggest questions facing individuals when they reach 62 is whether or not they should start to take their Social Security check at that age (partial payment) or wait until they reach full payment age. You also have the choice of waiting past full payment age until you are 70, and thereby increase your payment amount.

There is also the matter of cost-of-living increases set by the government each year, but that amount has either been 0 or very slight the last few years.

Years ago you could opt to repay the amount you received from the partial payment choice back to the government once you reach your full payment age, and then you would be entitled to receive the full payment amount going forward. That is no longer possible to do, so your first selection is the permanent selection.

The Social Security Administration has provided a site for you to visit that assists you in making that decision. Please keep in mind that the amount you receive increases by 8% if you postpone receiving your first check from when you attain full payment age until you reach the age of 70. The 8% increase is not compounded each year that you wait.

That site can be found at

(7/30/17)- The Treasury Department has emailed the 30,000 participants in the myRA program that it was phased out in the next few months, since it has proven to be too expensive for the government to run. Participants are being given the option of rolling over their myRAs into a Roth individual account,

The myRA accounts were established in 2015 under the Obama administration. They were made available to workers who did not have access to workplace savings accounts. Account holders could contribute up to $5,500 a year or $6,500 if they were 50 or older.

Please see our note dated 4/21/14 below for more information on the creation of myRA accounts.

The funds in myRA accounts were invested in U.S. Treasury savings bonds, which paid the same variable rate as the Government Security Fund, available to federal employees through the government retirement plan. The maximum that workers could save was $15,000.

Participants had contributed about $34 million in totol to their plans, according to the Treasury Department. Jovita Corranza the U.S. treasurer stated that the demand for this type plan was not high enough to justify its existence.

He stated the program has cost the government $70 million since 2014, and would cost $10 million a year to run in the future.

(7/19/17)-The average company contribution to 401 (k) plans rose to an estimated 4.7% of employees salaries in 2016, which was up from 3.9% in 2015, according to data on 1,900 workplace savings plans run by the mutual fund company Vanguard Group. This was the biggest year-to-year jump since 2007.

The average contribution from the employees and their employers of their salaries has stayed at the stagnant 11% levels since 2007

(8/30/15)- On the day that a trial was set to start, Boeing Co. announced that had agreed to settle a nine-year old lawsuit against it for improperly overseeing the firms that had offered their products for its employees’ and retirees’401(k) plans.

The two sides are expected to update the court on the details of the settlement next month, and set a timeline for seeking final approval, according to a court order.

The class action suit against the company was brought on behalf of its 190,000 employees and retirees, at that time. The suit alleged the company failed to meet its obligations to the employees and retirees by allowing excessive 401(k) fees to participants in the plan, and in choosing higher-cost mutual funds over cheaper options.

The suit also alleged the company made 401(k) plan decisions that benefitted vendors to the company who received other Boeing business.

The suit alleged the company had violated the terms of the Employee Retirement Income Security Act (ERISA). Lockheed Martin Corp. recently reached a $62 million settlement shortly before that trial was set to begin in which similar violations of ERISA had been alleged by the plaintiffs.

Earlier this year the U.S. Supreme Court ruled that Edison International, a subsidiary of Southern California Edison, has a continuing duty under ERISA to monitor and remove imprudent investments in the company’s 401(k) plans.

Regulation of the 401(k) industry is under the jurisdiction of the U.S. Labor Department, which in rules that it laid down in 2012 requires companies to clearly disclose all fees to participants in their plans.

(2/22/15)- You usually have to wait until you are 59 ½ to take a distribution from a retirement account without incurring a 10% penalty, but you may make a withdrawal from an employer-based account, without incurring a penalty, if you retire, quit, or are laid off when you do so in the calendar year that you turn 55. If you are a public safety worker, you can do so if you are as young as 50.

At 59 ½ you become exempt from the usual rule that requires money converted from a traditional IRA to a Roth IRA to stay in place for five tax years or else be subject to a penalty

(4/21/14)- In his State of the Union message in January, President Obama proposed a new type of retirement account, which he called “myRA” for workers who do not have the 401(k) option available to them. He has issued an executive order which directs the U.S. Treasury Department to create this account starting late this year.

Contributions will be considered as after-tax contributions and grow tax free.  It will be open to individuals earning less than $129,000, and couples, who earn less than $191,000, with an annual contribution limit of $5,000. For those 50 and older, the yearly contribution limit is $6,500.

The account will offer a single investment option, namely, a savings bond that gives the same rate of return as the G Fund (Government Securities Fund) in Federal Thrift Savings Plans. That fund’s average rate of return from 2003 through 2012 was 3.61%.

The account can be opened with as little as $25 and the individual can make subsequent contributions through payroll deductions of as little as $5. There are no fees. The principal will be guaranteed, and the fund can be transferred from job to job.

Each account will be capped at $15,000, or for a duration of 30 years, whichever comes first. At that point, the fund can be rolled over to a private-sector retirement account. There are no penalties for early withdrawals.

(12/22/12)- In a major change in policy as to the company's contributions to its employees' 401(k) plans, IBM will make its company contribution once a year, at the end of the year, instead of making these contributions periodically during the year. The contribution will be made on December 15th, and it will be made only to current employees as of that date or retirees eligible for contributions on that date.

About 9% of employers make their 401(k) once a year, according to Aon Hewitt, a benefit consulting firm. Thus IBM employees will not be able to spread out their investment decisions throughout the year, but instead will have to make that purchase only once a year.

(7/2/09)- According to a recent survey by the Grant Thornton, a compensation benefits firm, 29% of employers have altered or intend to alter their 401(k) match this year. Two-thirds of those will eliminate it (in some of the cases for only a temporary period of time), 22 percent will reduce it and 11% intend to increase their match.

The Pension Rights Center maintains a list of employers that have downgraded their matches that can be viewed at .

(5/13/09)- President Barack Obama's budget proposal for the federal fiscal year that starts in September, 2010 calls for the future establishment of a program in which all workers would be automatically enrolled in employers' retirement plans. Under the present set-up, most plans require the employee to act in order to be in the plan.

Under the administration's plan, employers that don't offer a retirement plan would be required to enroll their employees in a direct-deposit individual retirement account (IRA). Employees would be able to opt out of either approach.

Separately, legislation has been introduced in Congress that would require the 401(k) to list the fees on the investment statement, and would essentially repeal regulations that allow mutual-fund companies to offer personal advice to 401(k) participants in the plans the companies manage.

(4/21/09)- Starting January 1, 2010 non-spousal beneficiaries of 401(k) plans will be able to roll a lump-sum distribution into their own "inherited" IRA account. Up until now, only spouses could effectuate such a roll-over, unless the company 401(k) plan specifically allowed this to happen.

Although the beneficiary will have to start taking distributions immediately, he or she can thus avoid the big tax bite that would come from taking one big lump-sum distribution. On the other hand, spouses do not have to start making distributions immediately.

Congress approved this non-spousal change in the economic-recovery package that was passed late last year.

The Congress enacted a similar law in 2006,but a 2007 ruling by the IRS gave the employers sponsoring the 401(k) plans the right whether or not to allow such transfers by heirs other than spouses


By Allan Rubin
updated August 7, 2017

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