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ACLI Defends Retirement Bill Against 'Stretch IRA' Attack

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The American Council of Life Insurers is defending the Setting Every Community Up for Retirement Enhancement (Secure) Act of 2019 bill against attacks on one of the bill’s “pay for” provisions: a provision that could discourage use of “stretch individual retirement accounts,” or stretch IRAs, in efforts to pass wealth on to heirs.

The House passed its version of the bill by a 417-3 vote in May, with strong support from the AARP and labor groups as well as financial services groups.

(Related: Ed Slott: Killing Stretch IRAs Would Be a ‘Revenue Loser’)

But some financial advisors were expressing concerns about the stretch IRA before the House vote.

Anger about the stretch IRA provision has now bubbled up into the Wall Street Journal.

The newspaper ran an op-ed opposing the stretch IRA provision last week. This week, the paper’s editors ran an editorial with the headline, “IRAs in Political Sights.” The Wall Street Journal contends that the stretch IRA program change would break a social contract and let the political class get “more control over America’s individual savings and investments.”

ACLI President Susan Neely responded Wednesday with a statement arguing that the Secure Act bill would help many low-income and middle-income Americans save for retirement, while having a modest impact on other Americans.

“Only the wealthiest of Americans, less than 1%, use the ‘stretch IRA’ for estate planning,” Neely said in her statement. “Secure’s ‘stretch IRA’ provision shouldn’t derail a package to help millions of working Americans save for retirement.”

Neely said one Secure Act provision could make it easier for about 700,000 Americans who work for small businesses to save for retirement.

“The Senate should seize the historic opportunity at hand to pass this bill and confront America’s retirement savings challenges,” Neely said.

Wayne Chopus, president of the Insured Retirement Institute, also came to the defense of the Secure Act bill.

Chopus argued that Congress created the IRA program to give account owners a way to save for retirement, not to pass on assets to heirs.

“The time for waiting is over, and the Senate should pass this bill now,” Chopus said.

Stretch IRAs

The stretch IRA provision in the Secure Act bill would affect the children and grandchildren of wealthy IRA holders.

The current rules let heirs take required minimum distributions from inherited IRA assets based on their own life expectancies.

Drafters of the House version of the Secure Act bill, H.R. 1994, put the proposed stretch IRA program changes in bill Section 401.

For able-bodied adult children who inherited stretch IRAs in or after 2020, the Section 401 changes would require that distributions from the inherited stretch IRAs be made in 10 or fewer years, rather than over the course of the heirs’ lives.

Congressional budget analysts have estimated the provision could raise $15.7 billion in tax revenue over a 10-year period.


A copy of H.R. 1994 is available here.

A budget impact analysis is available here.

— Read Everyone Loves the Big New Retirement Bills… But…, on ThinkAdvisor.

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