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Prep Your Clients for 2 Bills That Could Change IRAs in 2022

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What You Need to Know

  • Two bills to keep an eye on are the Build Back Better Act and Secure 2.0.
  • Secure 2.0 has bipartisan support and is more likely to be enacted.
  • As always, check and update beneficiary forms for all retirement plans. Make this a priority for all clients.

IRA legislation will not happen in 2021, and the IRA parts of the Build Back Better Act (BBB) may not happen in 2022 if the legislation remains stalled in Congress. But other retirement-related bills may have a better chance of becoming law.

So advisors should still share retirement tax planning strategies with clients in 2022, based on the current tax structure and what might be in the works.

Hit the ground running in early 2022 by addressing essential retirement tax planning moves with clients and contacts. These conversations add to your value beyond your core asset management functions. They will also calm client fears about what any potential new tax legislation might mean to them.

The news is filled with tax information that worries clients. They need to hear from you now. They want to know what’s true and what isn’t, and how any of these items will specifically affect them and their family. This builds client confidence and creates new business as more clients are talking about conversations you are having with them.

Use this list below to identify clients, their beneficiaries (your successor clients), and prospects, who might be affected by these items. Connect with centers of influence such as CPAs and estate attorneys who might need to be in the loop.

In other words, go the extra mile to provide added value that clients will notice and remember. That always leads to new business. Even small things can create big business.

For example, we just heard from an advisor in Pittsburgh who trains with us who brought in a $2 million IRA in December simply because he took the time to review required minimum distributions a client was worried about.

The client was trying to help her aunt, who has dementia, figure out her 2021 RMD to make sure it got done before the year ended. The other (now former) advisor told her, “You can call the 800 number and they can take care of it.”

He then told us in an email after hearing that: “My client came to me yesterday in a panic. We took care of the RMD for her aunt. Our client is now transferring her aunt’s $2M+ retirement accounts to our firm.”

This tells you that clients see high value in helping them even with what may seem like simple, easy things to most advisors. But these things keep clients up at night.

This is how advisors build long-lasting and profitable relationships and referrals. This is going the extra mile.

Think about how you can carry out this strategy in 2022. Here are some ideas.

First, About Those 2022 RMDs …

Identify clients who will have RMDs due in 2022. This includes non-spouse beneficiaries who may still qualify for the stretch IRA (if they inherited before 2020) or who may be subject to the 10-year rule (if they inherited in 2020 or later).

Under the 10-year rule, no RMDs are required until the end of the 10-year term, but you might want some beneficiaries to begin taking them earlier in order to get some of those funds out at lower marginal tax rates in 2022 and later years.

2022 RMDs, in general, will be larger since the Dec. 31, 2021, balances they will be based on will likely reflect the impressive 2021 stock market gains. Make sure they plan for the taxes due on their 2022 RMDs.

You might consider connecting with their CPAs or other tax advisors at tax time 2022 about this.

The Two Big Bills to Watch

Two bills to keep an eye on are the Build Back Better Act (BBB) and  the Securing a Strong Retirement Act, known as Secure 2.0 (which many have forgotten about, but this one has bipartisan support and is more likely to be enacted).

Build Back Better Act

The BBB Act, which seems to be hanging by a thread, includes IRA provisions that will likely pass if the overall bill is enacted. That’s because these are not controversial compared with the bigger spending items that are causing the current gridlock.

Ban on Backdoor Roths 

If BBB is enacted, the one provision that might be effective in 2022 is the ban on backdoor Roths, regardless of income, even though most who take advantage of these are higher-income clients because they make too much to qualify for a direct Roth IRA contribution.

The backdoor Roth is a workaround to the Roth IRA contribution limits: The client first contributes to a nondeductible traditional IRA (where there is no income limit) and then converts those funds to a Roth IRA.

Also banned would be so-called mega backdoor Roths, for those in company retirement plans who can contribute after-tax funds to the plan and then convert them essentially tax-free to their Roth IRAs. For 2022, that can be for up to $61,000. If you have clients who do these each year, have them hold off in 2022 until we know if they will be allowed.

BBB Retirement-Related Provisions: Effective in Later Years

Ban on Roth Conversions for Higher-Income Taxpayers 

All other Roth conversions (of regular pretax retirement funds) would be banned for those with annual income in excess of $400,000 (individual), $450,000 (married-joint) and $425,000 (head-of-household). But this provision would not be effective until 2032 (10 years from now).

Even though this is 10 years out, let clients know now. They might want to begin a series of annual Roth conversions to use up the lower brackets now, with the goal of maximizing their Roth, just in case they are banned from doing so after 2031.

If anything, with this provision Congress will have encouraged the very activity (Roth conversions) they have set out to rein in. By providing a 10-year window, they will just be accelerating the Roth conversions they say they want to end.

Why would they do this? Money.

While Congress says they don’t want high-income people converting, they still want and need the Roth conversion revenue these large conversions bring in to balance their 10-year budget windows. So, have clients take advantage of this open window starting in 2022.

This shows us that Congress secretly loves Roth IRAs because it is addicted to the revenue they generate. It remains to be seen if they will ever really want to make them less valuable by adding restrictions or trying to tax them in some form. That would just kill their golden goose.

You can tell clients not to worry too much here. Congress got obsessed with Peter Thiel and his $5 billion Roth IRA, which was perfectly legal.

In fact, the Secure 2.0 bill includes “Rothification” provisions to increase Roth participation.

Large Retirement Accounts and High-Income Provisions 

These provisions in the BBB Act would affect those with combined retirement account balances exceeding $10 million and whose income exceeds the $400,000/$450,000/$425,000 thresholds that apply to the Roth conversion provision ban above.

The $10 million combined balance includes all IRAs, Roth IRAs, inherited retirement accounts, and all defined contribution company plans (but not defined benefit plans).

For those in this group, future IRA contributions would be prohibited. But oddly, 401(k) and other company retirement plans are unaffected, and they allow larger contributions.

Mega RMDs

The provision would require 50% RMDs over $10 million in combined retirement plan balances, and 100% RMDs for over $20 million. These RMDs would be regardless of age and would diminish Roth IRAs first.

Tell clients that if they meet these balance and income provisions, they do not have to worry just yet. Under the most current version of BBB (December 2021), these provisions would not be effective until 2029. But even so, it’s good to look down the road and see which clients could be approaching these levels by then. It may be more than you think.

A client with combined retirement balances of, say, $5 million today might easily reach the $10 million limit by 2029.

If you have clients who are close to these amounts, don’t keep adding to these accounts, especially to already large Roth IRAs, which seem to be a target of Congress.

Instead, have clients use permanent life insurance as a tax-free savings and wealth-transfer vehicle. Life insurance will also be more effective for estate plans and trusts since the Secure Act eliminated the stretch IRA for most non-spouse beneficiaries.

And use regular taxable accounts where accrued lifetime appreciation can be passed to beneficiaries income tax-free with the step-up in basis. IRAs and other retirement accounts never get a step-up in basis, so they will be less valuable for estate planning purposes.

Note that with all the talk about eliminating step-up in basis for the past year, it was not included in the latest version of any of these bills and will not be eliminated in the near future. The step-up in basis provision is too entrenched in tax law (since 1921), and every attempt to kill it for the past 100 years has been unsuccessful.

That’s because in the end, it affected too many unintended targets, like the so-called one-year millionaires who sold a home or business with large gains.

The Securing a Strong Retirement Act of 2021, aka ‘Secure 2.0′

With all the tax legislation oxygen taken up by BBB, many have forgotten about Secure 2.0, but it’s still waiting to see the light of day.

Keep an eye on this bill. Of all the the bills that could be enacted in 2022, this one has the best chance, having passed out of committee unanimously, with full bipartisan support. See which clients may be affected by these proposals in 2022:


Secure 2.0 includes provisions allowing both SIMPLE and SEP Roth IRAs. In addition, plan catch-up contributions would be required to be made to Roth plan accounts, and plans could allow participants to have employer matching contributions made as Roth contributions.

Other Proposed Changes 

  • Increasing the age at which RMDs begin over time from 72 to 75.
  • Indexing $1,000 IRA catch-up contributions for inflation.
  • Increasing the limit on catch-up contributions to 401(k)s and other plans for individuals who have attained age 62, 63 or 64.
  • Allowing matching contributions on student loan payments.
  • Eliminating the requirement that premiums for qualifying longevity annuity contracts be limited to 25% of an individual’s account balance. (Note: For 2022, the QLAC limit has increased from $135,000 to $145,000, based on IRS inflation-adjusted increases.)
  • Reducing the penalty for failure to take RMDs from 50% of the shortfall to 25%.
  • Expanding the IRS self-correction program (EPCRS) to include IRAs.
  • Indexing the $100,000 qualified charitable distribution limit to inflation and allowing a once-in-a-lifetime QCD to a split-interest entity such as a charitable remainder unitrust.
  • Expanding the age 50 exception to the 10% early distribution penalty to private-sector firefighters.
  • Changing the rules for when the statute of limitations begins for the excise tax on excess IRA contributions.
  • Limiting the repayment of qualified birth or adoption distributions to three years.
  • Allowing penalty-free withdrawals from IRAs and retirement plans for individuals in cases of domestic abuse.
  • Limiting the loss of tax-deferred treatment to the portion of an IRA that is involved in a prohibited transaction.

Don’t Forget Beneficiary Forms

And … as always, check and update beneficiary forms for all retirement plans. Make this a priority for all clients. Tax law changes and life transitions may require updating existing plans. This is the one area where the most expensive mistakes happen, and these oversights often cannot be fixed.

You see, there’s plenty to talk about with clients for 2022. Start adding value to your conversations, and have a happy new year!


Ed Slott, CPA, America’s IRA expert, is a nationally recognized speaker, television personality and author known for turning advanced tax strategies into understandable, actionable and entertaining advice. He was named “The Best Source for IRA Advice” by The Wall Street Journal.

Slott is a professor of practice at The American College of Financial Services and has been recognized by leading industry organizations for his significant thought leadership and contributions. He is one of the top pledge drivers of all time with his popular public television specials and the creator of Ed Slott’s Elite IRA Advisor Group.

He most recently published the updated book, “The New Retirement Savings Time Bomb: How to Take Financial Control, Avoid Unnecessary Taxes and Combat the Latest Threats to Your Retirement Savings” (Penguin Random House, 2021).


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