H.R. 9813: To amend the Internal Revenue Code of 1986 to impose limitations on high-income taxpayers with large retirement account balances.

This bill would change tax rules for retirement accounts held by certain high-income people with very large balances.

Limits on new contributions

Starting with tax years after December 31, 2026, some taxpayers with income above certain thresholds would no longer be allowed to make new contributions to retirement accounts once their total vested retirement savings exceed $10 million.

The rule would apply to balances across several types of retirement arrangements, including:

• 401(a) and 403(a) defined contribution plans
• 403(b) annuity contracts
• 457(b) deferred compensation plans maintained by eligible employers
• individual retirement accounts and similar IRAs

If a covered taxpayer’s retirement balances are already above $10 million, the amount they can continue contributing would generally be reduced by the amount above that threshold.

The bill defines a covered taxpayer using income test rules from the previous year. The income thresholds would be:

• $400,000 for most single filers
• $425,000 for heads of household
• $450,000 for married couples filing jointly or surviving spouses
• $225,000 for married individuals filing separately

What counts, and what does not

Certain amounts would not count as new annual contributions for this limit, including:

• rollovers from one eligible retirement account to another
• accounts received because of death
• transfers that happen because of divorce or separation

Employer and employee contributions to SEP IRAs and SIMPLE retirement accounts would not be treated as the kind of contributions restricted by this new rule, though they would reduce the remaining room for other contributions.

Penalty for excess contributions

The bill would also add a special excise tax rule for people who make contributions above the new limit. In effect, excess contributions to IRAs would be subject to the existing excess contribution penalty rules, with additional adjustments to account for this new limit.

Higher required withdrawals for some large accounts

Starting with tax years after December 31, 2033, the bill would require some high-income taxpayers with very large retirement balances to take larger minimum distributions from their accounts.

This would apply when a taxpayer’s combined vested balances in applicable retirement plans exceed the same $10 million threshold. For taxpayers whose balances exceed 200% of that amount, the bill would require even larger withdrawals, with a special calculation that also looks at Roth IRAs and designated Roth accounts.

The bill would also let the Treasury Department issue regulations for how these rules work in practice.

Access to funds for required withdrawals

The bill would require certain retirement plans to allow covered taxpayers to take distributions needed to satisfy the new withdrawal rules. This applies to:

• qualified employer plans
• 403(b) custodial accounts and annuity contracts
• governmental 457 plans

Other tax treatment changes

The bill would make the required distributions exempt from the 10% early-withdrawal penalty up to the amount that must be distributed under the new rule.

It would also impose a higher default withholding rate on these special distributions: 37% instead of 10%, unless an exception applies. Qualified Roth distributions would not be subject to that special withholding rule.

Relevant Companies

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