President Obama's new and low-budget proposal to help Americans build a tiny nest egg appears to violate federal laws barring retirement plan sponsors from steering investments to self-serving accounts, in this case the Treasury's own bonds, according to a new analysis.

The “myRA” plan Obama unveiled in his State of the Union address would also be outlawed in the private finance world because it offers no investment diversification and amounts to a conflict of interest, violations that call for fines up to $100,000 and up to a year in prison.

“If private sector plan sponsors offered this plan to their participants, they would be called crazy. They could also go to jail,” according to an analysis by the investment firm Marotta Wealth Management.

Obama's retirement plan has been heralded in some circles as a good way to get low- and middle-income Americans to put money away for their retirement tax free.

But Marotta mocked the $15,000 cap and single investment offered. “Can Obama truly believe that saving $15,000 over 30 years will contribute significantly to the retirement challenges that real families face?,” said the latest “Marotta on Money” note to investors from the firm that handles accounts of $1.5 million and over. The firm recommends that Americans put aside 15 percent of the annual income in retirement funds.

Marotta also said that myRA would violate several provisions of the 1974 Employee Retirement Income Security Act, or ERISA.

Key among them is the prohibition of steering retirement contributions to investments that are held by the plan sponsors. In Obama’s case, myRA contributions would be spent on the Treasury’s TSP G fund, which pays a tiny 2.5 percent. It also doesn’t offer any diversification.

The fund choice makes sense because the government is not likely to default. But it also steers money into a fund that benefits the government, a conflict barred by ERISA, said Marotta.

“Under ERISA, plan sponsors are not allowed to make transactions with plan assets that would benefit them. This is true even if the action would also benefit plan participants,” said Marotta. “All government savings bonds, the TSP G Fund included, are debt securities issued by the Department of the Treasury to help pay for the government’s borrowing needs. They pay a below-market rate, and the government benefits from their purchase. It is like a company borrowing money from its pension fund at the expense of their retirees’ returns. It is a prohibited ERISA transaction for good reason. Yet this is precisely what Obama’s myRA requires.”

Paul Bedard, the Washington Examiner's "Washington Secrets" columnist, can be contacted at