Retirement industry officials have removed a provision in Senate legislation (S.1813, the Highway Investment, Job Creation and Economic Growth Act) that would reduce the value of inherited IRAs. And they have done so as quietly as the provision was introduced.
It was added to the highway bill by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, on Feb. 7 during markup of the bill by his committee.
The Financial Services Institute, the Insured Retirement Institute and the National Association of Insurance and Financial Advisors all sought to have the provision removed from the bill.
As currently stated in the bill text, the provision would no longer permit tax-deferred stretches of IRAs (or stretch IRAs) for beneficiaries other than a spouse, minor children or the disabled. Others, like adult children, would only be permitted a five-year window to defer.
Stretch IRAs are sometimes used to reduce taxes by people who designated a young person as the beneficiary, thereby giving them a long opportunity to increase the value of the IRA through inside buildup.
According to budget officials, the provision would raise $4.6 billion over 10 years, to help pay for the highway bill itself.
A spokesman for the American Benefits Council, said the proposal as written would have done more harm than good because current artificially low interest rates are forcing companies to increase their contributions to defined benefit plans, money that could be better used for investment or hiring.