Mega-IRA bill would cap retirement balances at $10 million

The ranking Democrats on Congress's two tax committees want to stop wealthy savers from piling more money into retirement accounts once the accounts get very large. Rep. Richie Neal of Massachusetts and Sen. Ron Wyden of Oregon filed S. 5040 and H.R. 9813 on Tuesday; the bill would cut off contributions to traditional or Roth IRAs once a person's combined IRA and defined-contribution balances topped $10 million in the prior year. A 6% excise tax would apply to excess contributions, effective for tax years after Dec. 31, 2026.

Large accounts also face a revived version of required minimum distributions. If a taxpayer's traditional IRAs, Roth IRAs, and defined-contribution plans together exceed $10 million, the bill would require withdrawals, starting with tax and plan years after Dec. 31, 2033. A separate provision would require single filers earning above $400,000 and married couples earning above $450,000 to withdraw half the excess annual amount; the bill's summary does not say how that would work.

Wyden's statement made the fairness case. "Tax-preferred retirement accounts are not supposed to be a loophole for the ultra-rich to shelter immense fortunes; they're a lifeline for working Americans who may not otherwise have a dignified retirement," he said. Neal said the system's incentives should help workers gain financial security, not let the wealthiest exploit it.

The bill descends from a 2014 Government Accountability Office report that found a small number of taxpayers using private-company stakes to get around annual contribution limits. Those investors, the GAO concluded, likely undervalued the shares when they contributed them and reaped outsized returns when the companies succeeded. The Biden administration later proposed a $10 million aggregate withdrawal requirement, which never became law; the Obama administration's version was narrower, according to coverage.

The issue has gone from a 2014 curiosity to a numbered bill, and the Joint Committee on Taxation's 2024 data give the debate its factual basis. Whether the legislation can move through a divided Congress is unproven. But the $10 million line has bill text attached, and advisors can put it into projections now.

The proposal gets unusually specific. A client with a $9.5 million IRA and a $400,000 401(k) would be barred from making further contributions once the combined balance crosses $10 million, and the 6% excise tax on excess contributions would keep running until the overage is corrected. The minimum-distribution rule, effective in 2033 if enacted, would apply above the same line to Roth IRAs as well — accounts that normally have no required minimum distributions. The same $10 million line governs both the contribution cut-off and the distribution requirement.

The delayed effective dates give planners room to maneuver. Contribution limits start in 2027; required distributions start in 2034. For clients with concentrated private-company gains inside IRAs, the long runway invites specific preparation: model the account under both regimes, test distribution timing, and decide which assets should leave the tax shelter first. Roth conversions are not a workaround; the threshold counts Roth and traditional balances together.

The legislation is still a proposal, and the first test will come in committee. It combines contribution limits, mandatory distributions, and an income-based withdrawal layer, a sign that the mega-IRA issue is not fading. For planners, the job is to see what a decade of compounding above and below $10 million does to a client's options.