Although some sponsors make up their minds relatively quickly about offering or rejecting a Deemed IRA, others take a long time to say "maybe" or "probably."
Los Angeles legislators gave authority in 2007 for the $6.7 billion City of Los Angeles Deferred Compensation Plan to offer a Deemed IRA, but it took the plan's governing board 10 years to begin discussing it in detail. Even then, board members in March 2017 reported that "additional research would be required to assess the merits and feasibility of doing so," according to board minutes.
A year later, the board asked staff members to work with the city attorney and outside tax counsel to "conduct a full review" of regulatory requirements. Any plan design must be "fully vetted by board counsel and outside tax counsel."
By the June 2019 board meeting, members were discussing potential attributes of a Deemed IRA, including the prospect of lower fees vs. retail IRAs and adding a spousal option. This would allow an employee in the 457 plan to contribute to the Deemed IRA in the name of a non-working spouse.
"This means that a married couple could establish two IRAs and contribute to each up to the applicable IRA contribution limit," according to board minutes. "Married couples could thus more fully take advantage of the low-cost investment options" via the deferred contribution plan.
Board members directed the staff to develop a series of a plan design features, such as allowing both a traditional IRA and Roth IRA structure for the Deemed IRA, offering spousal IRA accounts and creating a dedicated trust for the use of the Deemed IRA.
June was the last time the board discussed the Deemed IRA.
Steven Montagna, chief personnel analyst in the City of Los Angeles employee benefits division, declined to comment on the progress or timetable of the board's Deemed IRA analysis.
Executives of the Wyoming Retirement System, Cheyenne, began discussing the possibility of a Deemed IRA in 2013, noting that "there are significant administrative complexities and potential cost in administering" it such as the limit on investments, the need for IRS approval and the fact that Deemed IRAs "are not commonly available or understood," according to a history of the discussions.
Wyoming's 457 plan had assets of $660.9 million as of Dec. 31, 2018, according to an annual report.
The retirement system's board in November 2018 approved the Deemed IRA concept and told staff to develop a plan for a possible Jan. 1, 2020 launch. The staff conducted a participant survey about interest in a Deemed IRA with 45% saying 'yes,' 14% saying 'no' and the rest being undecided.
Having met with the representatives of the plan's record keeper and custodian, the parties agreed to introduce the plan on Jan. 1.
However, the rollout has been postponed "pending continued analysis of the research," said Laura Bowen, operations manager for Wyoming's 457 plan, who added that the expected launch would now be in the third quarter of 2020.
