House Dems Take Aim at Richest Americans' Retirement Accounts in New Biden Plan Addition
House Democrats proposed a series of rules aimed to restrict the retirement accounts of the nation's wealthy as part of a broader reshuffling of the tax code attached to President Joe Biden's Build Back Better plan.
As part of a legislative package passed Wednesday evening, America's rich that hold 401(k), Roth, and saving accounts individually valued at over $10 million would be forced to redistribute their assets each year as part of a new required minimum distribution (RMD) rule.
The measure would also end "backdoor Roths," a practice by which an individual contributes to a non-Roth account and later converts it into a Roth IRA. This practice, as well as funding of 401(k) plans and IRAs, are strategies used to avoid taxes, which, when used by the wealthy, can lead to the government missing out on billions in tax revenue.
"IRAs were designed to provide retirement security to middle-class families, not allow the super-wealthy to avoid paying taxes," Senate Finance Committee Chair Ron Wyden said in a July statement after his committee released new data on mega IRAs. "It is shocking, but not surprising, to see how the use of mega-IRA accounts by mega-millionaires and billionaires has exploded."
These proposals were included in Biden's original $3.5 trillion plan but were stripped from the current $1.75 trillion version following negations from the remaining holdout voters in the U.S. Senate. They will also be implemented years later than originally proposed.
Under its current iteration, the RMD rule is tied to age rather than wealth. The new measure would require wealthy account holders of any age to withdraw a chunk of their retirement balances annually that they could owe income taxes on.
If the provision makes it through the final bill, it will go into place on January 1, 2029.
The plan remains unpopular with Republicans. In order to pass the measure, Democrats will need to maintain a united front in Congress and secure the votes of Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who have stood in opposition of the Biden bill. Massachusetts Congressman Richard Neal, who chairs the House Ways & Means Committee, voiced his support of a crackdown in July.
"IRAs are intended to help Americans achieve long-term financial security, not to enable those who already have extraordinary wealth to avoid paying their fair share in taxes and deepen existing inequalities in our nation," Neal said.
