Header Section

Smart money/Coming Soon

Retirement Plan Simplification Legislation Proposed in Congress

On May 22nd, Congressman Richard E. Neal (D-MA) introduced H.R. 2117, The Retirement Plan Simplification and Enhancement Act of 2013, in the House of Representatives. H.R. 2117 is proposed legislation that is intended to boost retirement savings.

Rollovers of Life Insurance to IRAs Would be Allowed
The bill proposes several IRA related changes. One proposed change would allow the rollover of insurance contracts from your employer's qualified retirement plan (e.g., 401(k)) into your IRA. Currently, you cannot invest any part of your IRA in life insurance contracts. You can, however, invest a limited amount of your employer retirement plan money in life insurance. Under the current rules, you can’t roll over your life insurance contract in your employer retirement plan to your IRA. The new legislation, if enacted would allow you to do so.

No Required Minimum Distribution for Balances Under $100,000
Currently, everyone who has an IRA or other retirement account must take required minimum distributions (RMDs) starting at age 70 1/2, regardless of the balances in those retirement plans. It doesn’t matter if your total balances are $50,000 or $5,000,000; you have to take RMDs. Under the proposed legislation, the RMD rules would be relaxed and you would not be forced to take RMDs if your total balance in all retirement accounts is $100,000 or less.

60-Day Rollovers for Non-Spouse Beneficiaries
Under current law, if you are a non-spouse beneficiary of someone who died and left you their IRA or employer retirement plan, you cannot move those retirement funds to a beneficiary (or inherited) IRA via a 60-day rollover. If you inherited an employer retirement plan or IRA and you’re not the decedent’s spouse, the only way to move those funds, under current law, is by way of a direct rollover or transfer. When money is moved in this manner, it goes directly from one retirement account to another and you don’t have control or use of the money while you’re moving it. Under H.R. 2117, you would be allowed to take a distribution made payable to yourself and do a rollover within 60 days, similar to the way you can move your own retirement funds.

Caution: The above proposed changes have only been introduced in Congress and are NOT law. Check back to The Slott Report for updates.

-By Joe Cicchinelli and Jared Trexler


Very minor changes.
The system needs a bit larger overhaul. An employee with a 401(k) (but no match, and high fees, so they don't deposit at all) is not eligible to deposit to a tax deducted IRA if over a certain income. This needs fixing badly.
Lets stop tinkering and offer a new set of rules that simplifies this mess.
When I read Ed's books, I'm grateful for the education, but shake my head at the complexity of our tax code. No wonder so many others get it wrong.

Post a Comment


Thursday's Slott Report Mailbag

Consumers: Send in Your Questions to [email protected]

You recently said that a 401(k) distribution would add to your MAGI (modified adjusted gross income) for the purpose of determining if you are subject to the 3.8% healthcare surtax. What about Roth IRA distributions? Would they also count towards your total MAGI income for surtax purposes?


IRA distributions are exempt from the 3.8% surtax, but taxable distributions from IRAs can push income over the threshold amount, causing other investment income to be subject to the surtax. Because Roth IRA distributions are generally tax-free, they don’t count towards your total MAGI.