Soaking Super-Rich Pensions


This Wednesday the House Ways and Means Committee after over seven hours of ‘deliberation’ in a near party-line vote of 24-19 approved the $3.5 trillion Build Back Better Act.

According to ASPPA news the retirement-based changes within the bill’s funding section that are supposed to raise approximately $2.1 trillion over 10 years include:

  • Implementing a contribution limit for individual retirement plans for taxpayers with incomes of more than $400,000 and account balances in excess of $10 million (including an individual’s combined IRA and DC plan account balances).
  • Requiring a minimum distribution of 50% of the amount by which an individual’s prior year combined traditional IRA, Roth IRA and DC plan account balances exceed $10 million.
  • Eliminating Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of households with taxable income over $425,000 (all indexed for inflation).
  • Prohibiting an IRA from holding any security if the issuer of the security requires the IRA owner to have certain minimum level of assets or income, or have completed a minimum level of education or obtained a specific license or credential.
  • Expanding the statute of limitations with respect to IRA noncompliance from three years to six years. 
  • Prohibiting investment of IRA assets in entities in which the owner has a substantial interest. 
  • Treating IRA owners as disqualified persons for purposes of the prohibited transactions rules. 

Nothing that would impact any of my clients, based on the information I have on them, but that second point about requiring minimum distributions from accounts in excess of $10 million might have real consequences.

Let’s look at an example of a guy who may have $100 million in his IRAs. Reading this literally, and prior to any regulatory ‘adjustments’, Mitt Romeny would need to take out (and pay taxes on) $45 million when this law takes effect. And if he doesn’t? Would the 50% excise tax currently on missed required minimum distributions based on age then kick in?

One response to this post.

  1. Posted by geo8rge on September 18, 2021 at 10:24 am

    Pension and trust assets are difficult to move offshore and hide. Pension and trust assets are probably easier to tax than real estate. States have first dibs on real estate tax so the feds will tread lightly. Almost universally pension and trust assets are owned by people and entities who, some might say, don’t need all that money and could share some with the needy (retired veterans, teachers, ect). Pension and trusts have ,according to some definitions of abuse, been used by the wealthy to avoid estate and all other taxes. Pensions and trusts are taxed very lightly, so as Willy Sutton opined, that’s where the money is.

    Tax on university endowments passes


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