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House Democrats propose new retirement plan rules for the rich, including contribution limits and a repeal of Roth conversions


Mandel Ngan | AFP | Getty Images

House Democrats proposed a slew of changes to retirement accounts for the rich on Monday, part of a re-structuring of the tax code tied to a $3.5 trillion budget plan.

Taken together, Democrats’ reforms aim to erode the use of retirement accounts as a perceived tax shelter for the wealthy and instead promote them as a way for low- and middle-income Americans to build a nest egg instead.

Most of the changes would start in 2022.

Wealthy individuals with retirement accounts exceeding $10 million would be prohibited from contributing extra savings and would have a new required minimum distribution each year, according to an outline of tax legislation unveiled Monday by the House Ways and Means Committee.

The bill would also repeal so-called Roth conversions in individual retirement accounts and 401(k)-type plans for those making more than $400,000 a year. It would also prevent savers from using the so-called “mega backdoor Roth” strategy, regardless of income level.

Further, the legislation would prohibit individual retirement accounts from holding investments that require buyers to be accredited investors, a status generally reserved for wealthy investors.

The proposals are part of a broader theme of raising taxes on those who earn more than $400,000 a year to help pay for education, climate, paid-leave, childcare and other measures while also making the tax code more equitable.

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They also follow Democrats’ outcry following a recent ProPublica report that Peter Thiel, a PayPal co-founder, owns a Roth IRA that had grown to $5 billion in 2019, up from less than $2,000 in 1999.

“IRAs were designed to provide retirement security to middle-class families, not allow the super wealthy to avoid paying taxes,” Sen. Ron Wyden, D-Ore., chair of the Senate Finance Committee, said in July after a data release showing growth of “mega” IRAs.

Democrats have narrow margins within which to pass a bill, which they aim to do with a simple majority via a budget reconciliation maneuver.

Republicans remain staunchly opposed. Rep. Kevin Brady, R-Texas, and ranking member of the Ways and Means Committee, framed the spending as the “greatest expansion of the welfare state in our lifetimes” during a Thursday hearing, saying that it “wastes hard-earned tax dollars.”

Contribution limits

RMDs for “mega” IRAs

Backdoor Roth

Mega backdoor Roth

Accredited investors



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