Draft legislation aimed at curbing tax-avoiding strategies through Roth IRAs and increasing retirement savings tax incentives for less affluent people was released Friday by Sen. Ron Wyden, D-Ore., ranking member of the Senate Finance Committee.
Mr. Wyden, who could become committee chairman if Democrats regain the Senate next year, took aim at what he called “mega-Roth IRAs.” He said in a statement it was “time to face the fact that our tax code needs a dose of fairness when it comes to retirement savings.” He is circulating the draft proposal to get ideas for future legislation.
The bill, as proposed, would prohibit contributions to Roth IRAs with balances above $5 million; eliminate Roth conversions for IRAs and employer-sponsored plans; close estate-planning tax loopholes; and make the Savers Credit, a retirement savings tax break for lower-income families, refundable if contributed to eligible retirement accounts, more user-friendly. It would also gradually raise the age for taking required minimum distributions to 73 from the current 70-1/2 and remove the rule for people with accounts of less than $150,000. Another proposal would allow employers to contribute to 401(k) plans to offset an employee's student loan repayments.