On Monday, September 13th, the House Ways & Means Committee proposed sweeping changes to retirement accounts for high-net-worth individuals.  The proposals are aimed at reducing the dollar value of assets held in Individual Retirement Accounts (IRAs) for these high-net-worth individuals. Below are specific items included in the proposals:

  • The proposed legislation would prohibit individuals from making Traditional or Roth IRA contributions if total aggregate IRA and defined contribution account (401k) balances exceed $10 million.
  • This change would only impact taxpayers over certain income thresholds: $400K single filers, $425K head of household, and $450K for married filing jointly. The changes would not apply to taxpayers with incomes below these thresholds.
  • The bill would also impose new Required Minimum Distributions (RMDs) for individuals with aggregate account balances exceeding $10 million. These individuals would be required to distribute at least 50% of the excess over $10M the following year (same income limits above apply).
  • To the extent that the aggregate account balances exceed $20 million, that excess would be required to be distributed from all Roth designated accounts up to the lesser of 1.) the amount needed to bring the aggregate balance down to $20 million or 2.) the aggregate balance in all the Roth accounts.
  • Proposals would also require companies with defined contributions plans to report annually to the IRS all balances over $2.5 million.
  • The proposed legislation would eliminate the ability for Roth conversions for IRAs and 401(k)s if over the income thresholds noted above. This includes eliminating the so-called ‘backdoor’ Roth strategy.
  • The bill also targets and eliminates the so-called “mega backdoor Roth” for all income levels (i.e., it prohibits after-tax IRA and employer plan contributions from being converted to Roth accounts.)
  • As it stands, the legislation would prohibit IRAs from holding unconventional assets or alternative investments through accredited investor status. Any IRA that holds these investments currently would have a two-year transition period for compliance.  IRAs holding such investments after the two-year transition period would lose the IRA status.

Have questions about your retirement accounts?  Talk to one of our Barnes Dennig high net worth experts, or call us at 513.241.8313 to ensure your retirement accounts are ready for the changes ahead. We’re here to help.