“Stretch” IRAs under Review by Congress (4/11/17)

 “Stretch” IRAs under Review by Congress

 The United States Senate is considering legislation that would force non‐spouse beneficiaries of qualified defined‐contribution accounts and individual retirement accounts (IRAs) to pay taxes on the balance within five years of the owner’s death.

 Under current rules, people who contribute to an IRA and don’t need the money to meet retirement living expenses can pass the account to their heirs. The assets in the account can keep growing tax‐ deferred throughout the heirs’ lifetime, subject only to annual force‐outs known as required minimum distributions (RMDs): the so‐called “stretch IRA.”

 The Senate proposal is included in a bill called the Retirement Enhancement and Savings Act, which was entered on the legislative calendar November 16, 2016.

 The Act would require beneficiaries of an inherited IRA or other qualified defined contribution account to withdraw – and recognize in income – all amounts exceeding $450,000 as of the date of the owner’s death, within five years of that date.

 Surviving spouses, minor children and special needs beneficiaries would be exempt from the requirement. And Roth accounts, including Roth IRAs, would not be affected.

As of today, no action regarding the bill has taken place. However, the change to the IRA rules was approved by the bipartisan Senate Committee on Finance in September 2016, 26‐0, prior to its inclusion in the Bill. Similar provisions have been included in other Budget and Tax Legislation proposals.

Prudential’s Advanced Markets Group will keep you informed and up to date on any further developments.

Stay Tuned…


Prudential Financial and its financial professionals do not give legal or tax advice. Clients should consult their own advisors.

The Prudential Insurance Company of America, Newark, NJ.