SECURE / RESA 2019 Any Opposition to Elimination of Stretch for Adult Beneficiaries of Single People?

Submitted by Diana Petitti on Tue, 2019-04-09 22:04

I have been following the bills that have been introduced in the House and Senate that would change the period of distribution of assets for inherited IRAs/401(k)s–Senate Finance Committee’s Retirement Enhancement and Savings Act (RESA) and the House Ways and Means Committee’s Setting Every Community Up for Retirement Enhancement (SECURE) Act. Both versions keep the provision for distribution over remaining lifetime for certain classes of beneficiaries (spouses of the IRA owner/employee, disabled or chronically ill individuals, individuals no more than 10 years younger than the IRA owner/employee, child of the IRA owner/employee who has not reached the age of majority). But for healthy adult children and other healthy family heirs, the period of distribution would be either 5 years (for amounts above $400,000) in the Senate bill or 10 years in the House bill.

Are there any organized groups opposing this change?

By exempting “widows and orphans,” the bills seem designed to draw little debate. Single people with substantial wealth accumulated in an IRA/401(k) are probably not a highly sympathetic group nor one easy to organize to lobby Congress about this change. To me (as a single person with most of their wealth in an IRA who has been using the IRA as an estate tool), it seems unfair to change the distribution rules now, although I recognize that taxes are rarely fair.

Any entity to work with to oppose?



Submitted by Chuck 2009x on Wed, 2019-04-10 18:09

  • None that I know of.  The financial industry is gung-ho behind it because it will result in a lot of new money.
  • And they figure they will hold onto a lot of the money affected benes will be forced to withdraw; after the benes pay the taxes, they will just dump the remainder into taxable accounts.
  • The accelerated distributions are specifically earmarked as a payfor for the expansion of plans to other people.  In other words, the increased tax receipts from affected benes offset the tax revenue lost from new participants.
  • The industry looks at it like this:
  • We get a new $100 from a new participant
  • An affected bene has to take out $100, pays $22 (or whatever) in taxes on it, and then gives the remaining $78 back to us.
  • We end up with $178 under management instead of $100.
  • You have to understand that when they put this together, they start with “How much tax revenue are we gonna lose?”  And after they come up with that number, the next order is, “Go find us a group that’s big enough so that we won’t damage them so bad it looks ridiculous, and small enough so that they have no clout.”  And there was a Supreme Court ruling several years ago that in passing mentioned that stretchability for non-spousal beneficiaries wasn’t an original intention of the rules.
  • When I caught wind of RESA 2016, I wrote to each member of the Senate Finance Committee, my two Senators, and my House rep.  The only one I even got a form letter reply back from was my House rep.

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