By Ian Berger, JD
IRA Analyst
In the spirit of the holiday season, here’s a list of cheers and jeers for the IRS and Congress:
Cheers to the IRS: To its credit, the IRS did issue timely guidance on two retirement-related provisions set to kick in next year. The first is the SECURE 2.0 Act requirement that, beginning January 1, 2026, certain high-paid employees who want to make 401(k) catch-up contributions must have them deposited into a Roth account. The second is the One Big Beautiful Bill Act (OBBBA) provision allowing for Trump accounts. Contributions to those accounts are expected to be available sometime in 2026, but not before July 4.
Jeers to the IRS: However, we must continue to ding the IRS for failing to address a very important, yet simple, question relating to 529 plan-to-Roth IRA rollovers. In the SECURE 2.0 Act, Congress said that, starting in 2024, owners of unused 529 accounts can transfer up to $35,000 of surplus funds tax-free to a Roth IRA for the benefit of the 529 beneficiary. The new law requires that the 529 account be held for at least 15 years, but doesn’t tell us how that rule works if the 529 beneficiary is changed (for example, if the account owner/parent changes the beneficiary to himself). Does the 15-year clock start over again or can the period with the prior 529 beneficiary be tacked on? An answer is long overdue.
Cheers to Congress: This year, unlike in December 2019 and 2022, Congress did not hit us with last-minute legislation that would make massive changes to the IRA and employer plan tax rules. Of course, OBBBA was signed into law on July 4, 2026, but aside from the introduction of Trump accounts, there were no provisions directly related to retirement accounts.
Jeers to Congress: As much as we’re grateful that Congress didn’t saddle us with end-of-the-year retirement legislation this year, it sure would be nice if the folks in Washington started giving some thought to simplifying the IRA and employer plan tax rules. Here are just some of many examples of how convoluted those rules currently are: There are now 21 different exceptions to the 10% early distribution penalty (3 of which apply only to IRAs, 7 of which apply only to employer plans, and 11 of which apply to both); 8 different IRA beneficiary RMD rules (just covering IRAs inherited after 2019); 6 different SIMPLE IRA plan deferral limits for 2026; 4 different ages when lifetime RMDs are first due; 2 different 5-year rules for Roth IRA distributions; and a partridge in a pear tree!
Best wishes for a happy holiday season to our Slott Report readers!
If you have technical questions you would like to have answered, be sure to submit them to [email protected], to be answered on an upcoming Slott Report Mailbag, published every Thursday.