The last few weeks in Washington, D.C., have provided yet another stark reminder to independent financial advisors and executives at financial services firms of the critical role FSI plays as our industry’s “rapid response” team on Capitol Hill and with regulators and legislators across the country.
On February 7, during the Senate Finance Committee’s review of a massive new highway bill, committee chairman Max Baucus (D-Mont.) added a provision that would have ended tax-deferred “stretches” of inherited IRAs for beneficiaries other than spouses, minor children or the disabled. Under the provision, most beneficiaries would have been forced to pay taxes on inherited IRAs over a drastically shortened five-year timeframe, rather than being allowed to defer the taxes over the beneficiary’s lifetime, as is currently permitted
This proposed new restriction on IRAs would have hurt small investors and financial advisors all over the country. If left unchallenged, it would have created a major deterrent against saving at a time in our nation’s history when saving is already strained, to say the least—all to fill the coffers of a government that refuses to make the difficult decisions needed to get its own fiscal house in order.
FSI—and our growing community of highly engaged financial advisors—were not about to allow investors’ IRAs to be targeted without a fight. On February 15, we issued a last-minute Call to Action to our members, urging them to write to their senators to oppose this troubling provision.
Within a few hours, over 2,000 FSI members responded, telling their senators loud and clear that increased taxes on inherited IRAs should not be used to pay for the highway bill or any other governmental spending for that matter.
I’m pleased to report that the legislators heard our message.
Two days after issuing our Call to Action, an amendment to the highway bill by Senate Majority Leader Harry Reid (D-Nev.) eliminated the tax on stretch IRAs. We applaud Leader Reid for his decisive action. With the daunting challenges small investors face in this economy, it is encouraging that our leaders understand the importance of upholding retirement savings in America.