Senate Finance Committee Chairman Max Baucus (D-Mont.) yesterday announced he will release a modified Chairman’s Mark of The Highway Investment, Job Creation and Economic Growth Act of 2012 ahead of the Committee’s consideration of the bill. The modified mark will incorporate amendments and altered revenue proposals from both parties to build broad support. One of these modifications would seriously impact the distribution of IRAs following the death of the account holder. I have copied relevant provision of the press release below:
Require Distributions of Inherited IRAs within 5 years. Under current law, holders of IRAs and 401(k)-type accounts are required to begin taking taxable distributions from those accounts once they reach age 70-1/2. … When the account holder dies, the taxation of the account is then spread over the life of the beneficiary. The Chairman’s Modification would require the retirement savings accounts to be treated, for tax purposes, as distributed within five years of the death of the account holder, unless the beneficiary is the account holder’s age, a child with special needs or older than 70. This provision is estimated to raise $4.648 billion over ten years.
In plain English, this means they are trying to eliminate the “stretch IRA."