A bill to amend the Internal Revenue Code of 1986 to impose limitations on high-income taxpayers with large retirement account balances.
Sponsored By: Senator Wyden, Ron [D-OR]
Introduced
Summary
Would cap annual retirement contributions for high-income taxpayers with very large account balances. The cap ties allowed contributions to the difference between a $10 million threshold and an individual's total vested retirement balances.
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- High-income savers. Taxpayers with modified adjusted gross income above filing-status thresholds (ranging from $225,000 to $450,000) would face the new limit. If an individual's vested balances meet or exceed $10 million the allowable contribution can be zero.
- Treatment of plan types and transfers. Contributions to SEP and SIMPLE plans are excluded from the definition of applicable annual contributions but reduce the remaining allowance. Rollovers and account transfers due to death, divorce, or separation are not treated as new applicable contributions.
- Tax and timing. The bill adds a special excise tax for excess applicable contributions under section 4973 and applies to taxable years beginning after December 31, 2026.
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Bill Overview
Analyzed Economic Effects
2 provisions identified: 0 benefits, 0 costs, 2 mixed.
Higher withdrawals for very large retirement accounts
If enacted, this bill would raise required minimum distributions for taxpayers whose prior-year aggregate vested balances exceed $10,000,000. If balances exceed twice $10,000,000, special limits would apply to the Roth portion of the increased amount. Distributions attributable to the increased RMD would generally be treated as required payments and would not be eligible rollovers. Roth amounts used to meet the increased RMD would be treated as qualified Roth distributions. Plans would have to let participants who certify they are subject to the higher-RMD rule elect distributions, with some exceptions. Certain distributions tied to the rule would face a flat 37% withholding rate and no election to reduce withholding; that withholding rule would not apply to qualified Roth distributions. You would not owe the 10% early-withdrawal penalty on amounts up to the required increased RMD. These distribution and withholding rules would start for taxable years beginning after December 31, 2033.
Retirement contribution cap for high earners
If enacted, this bill would limit annual IRA and similar contributions for high-income taxpayers with very large retirement balances. You would be affected if your modified adjusted gross income exceeded the filing-status thresholds and your prior-year aggregate vested balances were large. The law would cap applicable contributions at the excess of $10,000,000 over your prior-year aggregate vested balances. SEP and SIMPLE contributions would not count toward the cap but would reduce the $10,000,000 excess. The bill would also increase excise-tax exposure for contributions that exceed the new limit. After 2027, the $10,000,000 amount and the income thresholds would be adjusted for inflation; the $10,000,000 figure would be rounded down to the next $250,000, and AGI thresholds to the next $1,000.
Sponsors & CoSponsors
Sponsor
Wyden, Ron [D-OR]
OR • D
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
View on Congress.gov