New Bill Seeks 'Charity Parity,' Extending QCDs to Workplace Retirement Plans

"The simple QCD framework as originally created still seems to work best for IRAs," Slott told ThinkAdvisor Tuesday in an email. The issue of expanding the QCD rules, created under the Pension Protection Act of 2006, "has come up many times."

The reason no big changes have happened since PPA, "other than the annual inflation increases (which began in 2024 under Secure 2.0) was because this provision was intended to be simple, avoiding any tax, institutional or administrative complexities," Slott relayed. "That's why QCDs were set up only for IRAs (not employer plans) and only for direct transfers from IRA to qualified charities. That's also why DAFs (donor advised funds) were excluded, despite years of lobbying efforts from charities)."

The same reasoning, Slott continued, "has applied here with employer plans, like 401(k)s."

While it's a good idea, "the plan administrators might not think so," Slott continued.

On top of that, Slott explained, QCDs have limited utility as a planning tool for most 401(k) savers.

Many people who use QCDs use them to satisfy their annual required minimum distributions, "eliminating part or all of the tax bill on otherwise taxable RMDs," Slott said.

"That benefit won't apply to most workers in plans since they can delay RMDs until they retire, and at that point they will likely roll their 401(k) funds over to IRAs and do any QCDs from there. So while the provision sounds good — and it is for older employees who want to make contributions from their 401(k)s, there might not be that large of a pool of employees to make it worth it for plans to offer this," Slott relayed.

Even for workers who want to reduce their future RMDs, QCDs are "only available for those age 70 ½ or older," Slott explained. "There are likely less employees still working at companies at that point."

Eliminating IRA Rollover Hassles

The Charity Parity Act makes "other retirement funds eligible to make sure every senior can make donations, regardless of how they saved for retirement," Cramer said.

"Individuals who wish to make charitable contributions from employer-sponsored retirement plans are required to first roll over the funds to an IRA, creating unnecessary costs and additional steps for retirement savers," the lawmakers said.

The Charity Parity Act would "ensure retirement savers are treated equitably regardless of the type of retirement plan holding their assets," by eliminating, for instance, rollover-related fees, financial burdens, and the administrative complexities, the lawmakers added.

"From a planning standpoint, simplifying QCD access could increase charitable engagement among retirees who otherwise never bother with the rollover process," added Jeff Bush of The Washington Update in an email Tuesday. "The easier Congress makes charitable giving, the more likely people are to act."

Added Bush: "Advisors will appreciate the operational simplicity. Eliminating an extra rollover step reduces paperwork, potential errors, delays, and client confusion."

Will the bill pass? "There's a good chance of passing if it's attached to any must-pass piece of legislation this year," Bush added. "Perhaps the inevitable [continuing resolution] in September or the budget bill, which will likely get pushed to December."