The Retirement Enhancement and Savings Act or Stretch IRA — What Happens Next?

Not familiar with a Stretch IRA? You may know it as the Retirement Enhancement and Savings Act of 2016, its more formal title, when it easily passed the Senate Finance Committee last September. As of now, it still needs to get through the House, Senate, and be signed by President Trump.

Once passed, savers may lose a savings strategy that allows inherited IRA and 401(k) assets to be passed on to their children and grandchildren with minimal tax consequences. It would also require balances in most inherited IRA's and 401(k)'s to be distributed within five years of the saver's death.
The big appeal is the projection of an estimated $3 billion plus in revenue to the Treasury from 2017 to 2026.

As of now, heirs can stretch the distributions over their own lifetimes, and that means tax deferred balances would continue to grow. There is a provision in the bill that allows tax deferred growth of up to $450,000 to be exempt from the five year rule, but amounts over that will probably end up as taxable distributions within five years of the IRA/401(k) participant's death.

At this time, Republicans who control Congress are more apt to leave it alone, but since they also want to lower tax brackets and rates this could be used as a bargaining chip in tax reform negotiations. Of course, the stretch concept is also used with Roth IRAs where there is no tax paid anyway, so it is unlikely the trimming of the stretch would apply there.

The Pension and Savings specialists at Mercer PeoplePro are keeping a close watch and will provide updates as they occur so — please stay tuned.

Mercer PeoplePro Can Help
Curious about what will happen to The Stretch Ira or Retirement Enhancement and Savings Act? Ask a Pensions and Savings specialists at Mercer PeoplePro for wealth transfer tips to help soften the blow and enjoy 2 free hours of consulting. To set up your free consultation, visit MercerPeoplePro.com — we're standing by and ready to help