Legislation Aimed at Sweeping Changes to Investments in Retirement Accounts – New Rules Starting 2022 if Passed in House Vote

A CNBC.com article published this week outlines proposed legislation that would drastically alter retirement account laws, prohibit certain investment types in qualified accounts altogether, and change tax laws in an attempt to democratize retirement savings across all income levels.

● Today, our tax laws allow all taxpayers to make IRA contributions regardless of account size. Proposed legislation is designed to halt all contributions to retirement accounts once their combined value exceeds $10 million.

● The bill intends to repeal Roth conversions in IRAs and 401(k) plans for those who earn over $400,000 annually ($450,000 of taxable income for married taxpayers filing jointly - and $425,000 as head of household). It would also eliminate the frequently referred to “mega-backdoor Roth” strategy regardless of one’s income.

● The legislation intends to disallow investments that require participants to be accredited inside qualified plans, such as private equity, hedge funds and others. Proponents of the legislation view investments that require investors to be accredited as exclusive for the rich, creating unfair advantages in investing. The proposed law would make investment vehicles requiring accredited investors to be made exclusively in taxable accounts.

● The legislation is part of a much larger bill which intends to raise taxes on high earners, defined as over $400,000, in an effort to fund areas such as climate change, education, child-care, and paid-leave to name a few items specifically mentioned.

For the complete CNBC article and the Ways & Means document shared this week please see the links below.

House Committee - Ways & Means Document

Source: CNBC.com