What’s the Status of All Those Congressional Retirement Proposals?
During 2021, Congress has taken up a number of different retirement proposals, and it’s been difficult to keep track of them. Here’s an update of how things stand at the moment. Of course, new developments could occur at any time, so stay tuned.
Build Back Better Act
On November 19, 2021, the House of Representatives passed the Build Back Better Act (BBB) by a 220-213 margin. The $1.7 trillion bill includes a number of changes to retirement account rules. Those changes are similar to – but not exactly the same as – the changes proposed in an earlier House Ways and Means Committee bill. It is currently unclear whether the Senate will pass the House version of the BBB, a different version that may or may not include the retirement provisions, or none at all. In any case, here are the BBB changes:
Conversions of After-Tax Dollars. The so-called “Backdoor Roth IRA’ and “Mega Backdoor Roth IRA” conversion strategies would be eliminated effective January 1, 2022 – for all individuals, regardless of income.
Conversions of Pre-Tax Dollars. Roth conversions of pre-tax IRA and company plan funds would be barred for high-income individuals (single taxpayers with modified adjusted gross income over $400,000, and married taxpayers filing jointly with MAGI over $450,000). However, this proposal wouldn’t be effective until 2032.
Contribution and RMD Limits for Mega IRAs. High-income individuals (as defined above) whose combined IRA and defined contribution retirement accounts exceed $10 million would be subject to two new limits. First, they wouldn’t be allowed to make additional IRA or Roth IRA contributions. Second, a required minimum distribution (RMD) would be required – regardless of age. These limits wouldn’t apply until 2029. (By contrast, the Ways and Means Committee provision would have been effective in 2022.)
New Reporting Requirement. There is a proposed new annual requirement for employer defined contribution plans to provide information to the IRS on account balances of $2.5 million or more. The new reporting requirement was also delayed until 2029.
Statute of Limitations for IRA Noncompliance. The BBB extends the statute of limitations from 3 to 6 years for the IRS to go after misreporting of IRA valuations and prohibited transactions. This would be effective January 1, 2022.
Provisions Dropped. Two controversial provisions of the Ways and Means Committee bill were dropped from the BBB. The first would have prohibited IRA investments limited to “accredited investors.” The second would have tightened the prohibited transaction self-dealing rules.
SECURE 2.0 and Other Related Bills
Meanwhile, several different retirement bills, some with common elements, have been making their way through Congress. The goal of these bills is to further improve retirement savings opportunities. Those bills include the Securing a Strong Retirement Act of 2021), commonly known as “SECURE 2.0,” which the House Ways and Means Committee passed back in May. Among the provisions of SECURE 2.0 is a delay in the RMD age and an increase in IRA and plan catch-up contributions. Although SECURE 2.0 and the other related bills have enjoyed bipartisan support, it is unlikely any of those bills will be passed until at least early 2022.
Remember, the BBB has only been passed by the House, and SECURE 2.0 and related bills are only proposals. As soon as is something is finalized, the Slott Report will let you know.
Copyright © 2021, Ed Slott and Company, LLC Reprinted from The Slott Report, 12.14.2021, with permission. What’s the Status of All Those Congressional Retirement Proposals? | Ed Slott and Company, LLC (irahelp.com) Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.
