Take Action Today! | Millennium Trust Company
Take Action Today!

Proposed Changes to the Laws Governing Individual Retirement Accounts Will Limit Choices


U.S. House proposals will significantly limit individual investor choice and make it harder for small businesses to raise the capital they need for growth and new job creation.





As you may be aware, the United States House of Representatives has proposed changes to the laws governing individual retirement accounts (IRAs) as part of its $3.5 trillion reconciliation package. These changes, if enacted into law, would have a direct negative impact on the ability of investment sponsors to offer a full array of investments to retirement savers; on advisors to help their clients invest effectively; and on Americans’ ability to save for a secure retirement through an IRA.

How would the proposed legislation affect investment choices?

The proposed legislation would prohibit IRAs from holding privately-placed equity and debt securities and other investments that require IRA owners to meet minimum financial, educational or licensing requirements. For example, the legislation would prohibit IRAs from holding unregistered investments that are offered to accredited investors, like equity or debt investments in small businesses or investments in private funds. Many retirement investors hold these types of investments in an IRA today. Such investments would be prohibited if the proposed legislation is enacted.

The bill would also prohibit IRA owners from investing in non-publicly traded entities in which the IRA owner and related entities (including the IRA itself) own more than a 10% interest or any entity in which the IRA owner is an officer or director, regardless of ownership percentage. By way of example, single-member limited liability companies or any investment in an entity in which an individual is a director or officer could no longer be held in an IRA. IRAs holding any of the above investments would lose all the tax advantages previously available to the IRA.

What if legislation is enacted?

If the proposed legislation is enacted, investors will no longer be able to purchase any of the above investment types in their IRAs. Further, they will be required to dispose of any such investments that are currently held in an IRA by no later than December 31, 2023, which could result in significant and previously unforeseen financial and tax consequences, including taxes and penalties.

We’re advocating for investor choice

We are working closely with our third-party advisors in Washington D.C., along with other major industry participants, with the goal of having these provisions removed from the reconciliation package. Know that, as always, we will continue to be a strong advocate for investor choice.

What can you do? Time is of the essence – Take Action Today.

Contact your elected officials in the United States House of Representatives and Senate and make your voice heard.

Oppose Limitations

Oppose limitations on IRA investment choice (Sections 138312 and 138314 of the House reconciliation bill). These under-the-radar provisions have never been publicly vetted and will have unintended and adverse impacts on countless Americans who wish to save for a secure retirement through Main Street investments.

Negative Impact on Small Businesses

Tell them you are concerned that the legislation negatively impacts the ability of small businesses that employ everyday Americans to obtain the funding necessary to operate and grow their business and create jobs. The proposed legislation eliminates the ability of suitable investors to participate in private capital-raising transactions through their IRAs, a source of funding on which many of these small businesses rely.

Increase Wealth Gap

Let them know you believe the legislation will ultimately increase the wealth gap (which is in direct opposition to the stated goals of the legislation) because it would limit the ability of many Americans, whose investable funds are almost exclusively in their retirement accounts, to invest in these private investments. 

Unintended Consequences

The legislation:

  • negatively impacts individual investors’ ability to save for a secure retirement by limiting their choices and ability to diversify retirement savings outside of the stock market.
  • will likely cause retirement savers significant negative financial consequences by forcing them to sell or liquidate existing IRA investments at a depressed price by a publicized date, and it may also cause significant negative tax consequences (including early distribution penalties) by forcing retirement savers to distribute in-kind from their IRAs any investments that they are unable to sell or liquidate.

Contact Information

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At Millennium Trust, as always, we will continue to advocate for individual investor choice.