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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 5422 Introduced in Senate (IS)]

<DOC>

118th CONGRESS
  2d Session
                                S. 5422

 To amend the Internal Revenue Code of 1986 to provide a contribution 
limit and increased minimum distributions for certain retirement plans 
                      with large account balances.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            December 4, 2024

  Mr. Merkley introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
 To amend the Internal Revenue Code of 1986 to provide a contribution 
limit and increased minimum distributions for certain retirement plans 
                      with large account balances.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Retirement Fairness Act''.

SEC. 2. CONTRIBUTION LIMIT AND INCREASED MINIMUM DISTRIBUTIONS FOR 
              CERTAIN RETIREMENT PLANS WITH LARGE ACCOUNT BALANCES.

    (a) Contribution Limit.--
            (1) In general.--Subpart A of part I of subchapter D of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following:

``SEC. 409B. CONTRIBUTION LIMIT ON CERTAIN RETIREMENT PLANS WITH LARGE 
              ACCOUNT BALANCES.

    ``(a) General Rule.--Notwithstanding any other provision of this 
title, no applicable annual additions shall be made by, or on behalf 
of, an individual for the taxable year to any applicable retirement 
plan to the extent such applicable annual additions exceed the excess 
(if any) of--
            ``(1) the applicable dollar amount for the taxable year, 
        over
            ``(2) the aggregate balances to the credit of the 
        individual (whether as a participant, owner, or beneficiary) in 
        all applicable retirement plans (determined as of the close of 
        the calendar year preceding the calendar year in which the 
        taxable year begins).
    ``(b) Rules Relating to Contribution Limitations.--
            ``(1) Plans other than certain iras.--
                    ``(A) In general.--Except as provided in paragraph 
                (2), applicable annual additions in excess of the 
                limitation under subsection (a) shall be treated for 
                purposes of this title in the same manner as excess 
                deferrals are treated under section 402(g).
                    ``(B) Special rule for after tax contributions.--
                If, without regard to this paragraph, any portion of an 
                applicable annual addition to which subparagraph (A) 
                applies with respect to an individual is not excludable 
                from gross income of the individual (or no deduction is 
                allowable to the individual with respect to such 
                portion), such portion shall not be--
                            ``(i) includible in gross income by reason 
                        of the application of subparagraph (A), or
                            ``(ii) taken into account in computing the 
                        investment in the contract for purposes of 
                        section 72.
            ``(2) Special rule for iras.--
                    ``(A) In general.--In the case of an applicable 
                retirement plan which is an individual retirement plan 
                (other than a simplified employee pension under section 
                408(k) or a simple retirement account under section 
                408(p)), any applicable annual addition to such plan in 
                excess of the limitation under subsection (a) shall be 
                treated for purposes of sections 408 and 408A as a 
                contribution for the taxable year in excess of the 
                maximum amount allowable as a deduction under section 
                219 for the taxable year.
                    ``(B) After tax contributions.--In the case of 
                applicable annual additions in excess of the limitation 
                under subsection (a)--
                            ``(i) rules similar to the rules of 
                        paragraph (1)(B) shall apply to any such 
                        additions which are treated as designated 
                        nondeductible contributions under section 
                        408(o), and
                            ``(ii) section 408A(d)(2)(C) shall apply to 
                        any such additions which are to a Roth IRA (and 
                        to any net income allocable to such additions).
                For purposes of clause (ii), distributions from a Roth 
                IRA shall be treated as first made from amounts 
                described in clause (ii) and section 408A(d)(2)(C) 
                shall be applied in the same manner as if there were a 
                distribution of a contribution described in section 
                408(d)(4) (without regard to whether such distribution 
                is timely made).
            ``(3) Allocation of excess applicable annual additions.--If 
        the applicable dollar amount for a taxable year exceeds the 
        amount described in subsection (a)(2), the taxpayer may, in 
        such form and manner as the Secretary may prescribe, allocate 
        such excess to applicable annual additions to each applicable 
        retirement plan in such manner as the taxpayer chooses.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable annual addition.--
                    ``(A) In general.--The term `applicable annual 
                addition' means any of the following made to or on 
                behalf of an individual:
                            ``(i) An annual addition (within the 
                        meaning of section 415(c)(2)).
                            ``(ii) Any contribution to an individual 
                        retirement plan, including any employer or 
                        employee contribution to a simplified employee 
                        pension under section 408(k) or a simple 
                        retirement account under section 408(p).
                            ``(iii) Any deferral under an eligible 
                        deferred compensation plan described in section 
                        457(b) which is maintained by an eligible 
                        employer described in section 457(e)(1)(A).
                    ``(B) Rollover contributions disregarded.--A 
                rollover contribution under section 402(c), 403(b)(8), 
                408(d)(3)(A)(ii), or 457(e)(16) shall not be treated as 
                an annual addition.
            ``(2) Applicable dollar amount.--
                    ``(A) In general.--The term `applicable dollar 
                amount' means $4,000,000.
                    ``(B) Adjustment for inflation.--In the case of any 
                taxable year beginning after 2025, the $4,000,000 
                amount under subparagraph (A) shall be increased by an 
                amount equal to the product of--
                            ``(i) such amount, and
                            ``(ii) the cost-of-living adjustment under 
                        section 1(f)(3) for the calendar year in which 
                        such taxable year begins, determined by 
                        substituting `calendar year 2024' for `calendar 
                        year 2016' in subparagraph (A)(ii) thereof.
                    ``(C) Rounding.--If any amount as adjusted under 
                subparagraph (B) is not a multiple of $1,000, such 
                amount shall be rounded to the next lowest multiple of 
                $1,000.
            ``(3) Applicable retirement plan.--The term `applicable 
        retirement plan' means--
                    ``(A) a defined contribution plan to which section 
                401(a) or 403(a) applies,
                    ``(B) an annuity contract under section 403(b),
                    ``(C) an eligible deferred compensation plan 
                described in section 457(b) which is maintained by an 
                eligible employer described in section 457(e)(1)(A), or
                    ``(D) an individual retirement plan.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
and guidance as are necessary or appropriate to carry out the purposes 
of this section, including regulations or guidance that provide for the 
application of this section and section 4974(e) in the case of plans 
with a valuation date other than the last day of a calendar year.''.
            (2) Conforming amendments.--
                    (A) The table of contents for subpart A of part I 
                of subchapter D of chapter 1 of such Code is amended by 
                adding after the item relating to section 409A the 
                following new item:

``Sec. 409B. Contribution limit on certain retirement plans with large 
                            account balances.''.
                    (B) Section 402(g) of such Code is amended by 
                adding at the end the following new paragraph:
            ``(9) Aggregate limitation.--For additional limitation on 
        contributions to certain plans with large account balances, see 
        section 409B.''.
                    (C) Section 403(b)(1) of such Code is amended by 
                adding at the end the following new sentence: ``For 
                additional limitation on contributions to certain plans 
                with large account balances, see section 409B.''
                    (D) Section 408(r) of such Code is amended by 
                adding at the end the following new paragraph:
            ``(3) For additional limitation on contributions to certain 
        plans with large account balances, see section 409B.''.
                    (E) Section 457(c) of such Code is amended by 
                adding at the end the following new sentence: ``For 
                additional limitation on contributions to certain plans 
                with large account balances, see section 409B.''.
    (b) Excise Tax on Excess Annual Additions.--
            (1) In general.--Subsection (a) of section 4973 of the 
        Internal Revenue Code of 1986 is amended--
                    (A) by striking ``or'' at the end of paragraph (5),
                    (B) by inserting ``or'' after the comma at the end 
                of paragraph (6), and
                    (C) by inserting after paragraph (6) the following 
                new paragraph:
            ``(7) an applicable retirement plan (within the meaning of 
        section 409B(c)(3)),''.
            (2) Excess contributions to applicable retirement plans.--
        Section 4973 of such Code is amended by adding at the end the 
        following new subsection:
    ``(i) Excess Contributions to Applicable Retirement Plans.--For 
purposes of this section, in the case of applicable retirement plans 
(within the meaning of section 409B(c)(3)), the term `excess 
contributions' means, with respect to any taxable year, the sum of--
            ``(1) the excess of the applicable annual additions (within 
        the meaning of section 409B(c)(1)) to such plans over the 
        limitation under section 409B(a) for such taxable year, and
            ``(2) the lesser of--
                    ``(A) the amount determined under this subsection 
                for the preceding taxable year, reduced by the 
                aggregate distributions from such plans for the taxable 
                year (including distributions required under section 
                4974(e)) to the extent not contributed in a rollover 
                contribution to another eligible retirement plan in 
                accordance with section 402(c), 403(b)(8), 457(e)(16), 
                408(d)(3), or 408A(d)(3), or
                    ``(B) the amount (if any) by which the amount 
                determined under section 409B(a)(2) for the taxable 
                year exceeds the applicable dollar amount under section 
                409B(c)(2) for the taxable year.''.
            (3) Conforming amendments.--Subsection (a) of section 4973 
        of such Code is amended--
                    (A) by striking ``accounts or annuities'' and 
                inserting ``accounts, annuities, or plans'', and
                    (B) by striking ``account or annuity'' and 
                inserting ``account, annuity, or plan''.
    (c) Increase in Minimum Required Distributions.--
            (1) In general.--Section 4974 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following new 
        subsection:
    ``(f) Increase in Minimum Required Distributions for Payees With 
Large Aggregate Account Balances.--
            ``(1) In general.--If this subsection applies to a payee 
        for any taxable year--
                    ``(A) all qualified retirement plans and eligible 
                deferred compensation plans of the payee which are 
                applicable retirement plans taken into account in 
                computing the excess described in paragraph (2)(A) 
                shall be treated as 1 plan solely for purposes of 
                applying this section to the increase in minimum 
                required distributions for the taxable year described 
                in subparagraph (B), and
                    ``(B) the minimum required distributions under this 
                section for all plans treated as 1 plan under 
                subparagraph (A) with respect to such payee for the 
                taxable year shall be increased by the excess (if any) 
                of--
                            ``(i) the excess described in paragraph 
                        (2)(A), over
                            ``(ii) the sum of the minimum required 
                        distributions (determined without regard to 
                        this subsection) for all such plans.
            ``(2) Application.--This subsection shall apply to a payee 
        for a taxable year--
                    ``(A) if the aggregate balances to the credit of 
                the payee (whether as a participant, owner, or 
                beneficiary) in all applicable retirement plans 
                (determined as of the close of the calendar year 
                preceding the calendar year in which the taxable year 
                begins) exceed the applicable dollar amount for the 
                calendar year in which the taxable year begins, and
                    ``(B) without regard to whether amounts with 
                respect to the payee are otherwise required to be 
                distributed under section 401(a)(9), 403(b)(10), 
                408(a)(6), 408(b)(3), or 457(d)(2).
            ``(3) Coordination and allocation.--
                    ``(A) Minimum distribution requirements.--If this 
                subsection applies to a payee for any taxable year--
                            ``(i) this section shall apply first to 
                        minimum required distributions determined 
                        without regard to this subsection and then to 
                        any increase in minimum required distributions 
                        by reason of this subsection, and
                            ``(ii) nothing in this subsection shall be 
                        construed to affect the amount of any minimum 
                        required distribution determined without regard 
                        to this subsection or the plan or plans from 
                        which it is required to be distributed from.
                    ``(B) Allocation of increase in minimum required 
                distributions.--The taxpayer may, in such form and 
                manner as the Secretary may prescribe, allocate any 
                increase in minimum required distributions by reason of 
                this subsection to applicable retirement plans treated 
                as 1 plan under subparagraph (A) in such manner as the 
                taxpayer chooses.
            ``(4) Treatment of roth iras.--
                    ``(A) In general.--Notwithstanding section 
                408A(c)(5)--
                            ``(i) the aggregate balance to the credit 
                        of a payee of any Roth IRA shall be taken into 
                        account for purposes of this subsection, and
                            ``(ii) distributions from a Roth IRA may be 
                        taken into account in determining whether the 
                        required increase in minimum required 
                        distributions by reason of this subsection has 
                        been satisfied.
                    ``(B) Inclusion in income of distributed 
                earnings.--If any distribution from a Roth IRA is taken 
                into account under subparagraph (A)(ii), then, 
                notwithstanding section 408A(d)(5), the portion of such 
                distribution which is properly allocable to net income 
                on contributions to the Roth IRA shall not be treated 
                as a qualified distribution and shall be included in 
                gross income of the payee.
            ``(5) Phase-in for taxpayers with excess balances for 
        taxable year beginning in 2025.--
                    ``(A) In general.--If there is an excess described 
                in paragraph (2)(A) for the first taxable year of a 
                taxpayer beginning during 2025 (in this paragraph 
                referred to as the `historic excess'), then the amount 
                taken into account under paragraph (1)(B)(i) for such 
                first taxable year and each subsequent taxable year to 
                which this paragraph applies shall, in lieu of the 
                excess described in paragraph (2)(A) for each such 
                taxable year, be equal to--
                            ``(i) in the case of such first taxable 
                        year, 10 percent of the historic excess, and
                            ``(ii) in the case of each subsequent 
                        taxable year to which this paragraph applies, 
                        the sum of--
                                    ``(I) 100 percent of amount (if 
                                any) by which the excess described in 
                                paragraph (2)(A) for such taxable year 
                                exceeds the adjusted historic excess 
                                for such taxable year, plus
                                    ``(II) 10 percent of the adjusted 
                                historic excess for such taxable year 
                                (100 percent of such adjusted historic 
                                excess for any taxable year if it is 
                                less than $1,000).
                    ``(B) Adjusted historic excess.--For purposes of 
                this paragraph, the term `adjusted historic excess' 
                means, with respect to any taxable year, the lesser 
                of--
                            ``(i) the excess (if any) of the--
                                    ``(I) the historic excess, over
                                    ``(II) the aggregate amount of the 
                                historic excess taken into account 
                                under clauses (i) and (ii)(II) of 
                                subparagraph (A) for all preceding 
                                taxable years, or
                            ``(ii) the aggregate balances to the credit 
                        of the payee (whether as a participant, owner, 
                        or beneficiary) in all applicable retirement 
                        plans (determined as of the close of the 
                        calendar year preceding the calendar year in 
                        which such taxable year begins) in excess of 
                        $4,000,000.
                    ``(C) Taxable years to which paragraph applies.--
                This paragraph shall not apply to--
                            ``(i) any taxable year if the aggregate 
                        amount of the historic excess taken into 
                        account under clauses (i) and (ii)(II) of 
                        subparagraph (A) for all preceding taxable 
                        years equals such historic excess, or
                            ``(ii) the first taxable year in which the 
                        aggregate balances to the credit of the payee 
                        (whether as a participant, owner, or 
                        beneficiary) in all applicable retirement plans 
                        (determined as of the close of the calendar 
                        year preceding the calendar year in which such 
                        taxable year begins) are $4,000,000 or less and 
                        any subsequent taxable year.
            ``(6) Definitions.--For purposes of this subsection, any 
        term used in this subsection which is also used in section 409B 
        shall have the same meaning as when such term is used in such 
        section.''.
            (2) Exception from 10 percent additional tax on early 
        distributions.--Section 72(t)(2) of such Code is amended by 
        adding at the end the following new subparagraph:
                    ``(O) Distributions of excess balances.--
                Distributions from applicable retirement plans (within 
                the meaning of section 409B) to the extent such 
                distributions during the taxable year do not exceed the 
                amount (if any) by which--
                            ``(i) the amount determined under section 
                        409B(a)(2) for the taxable year, exceeds
                            ``(ii) the applicable dollar amount under 
                        section 409B(c)(2) for the preceding taxable 
                        year.''.
    (d) Reporting Requirements.--Section 6047 of the Internal Revenue 
Code of 1986 is amended by redesignating subsection (h) as subsection 
(i) and by inserting after subsection (g) the following:
    ``(h) Reporting Relating to Aggregate Contribution and Balance 
Limits on Certain Retirement Plans.--The Secretary shall require the 
plan administrator or trustee of an applicable retirement plan (as 
defined in section 409B) to make such returns and reports to the 
Secretary and participants and beneficiaries as are necessary to apply 
the aggregate limits on contributions imposed by section 409B and the 
increases in minimum required distributions required by section 
4974(e). If the account balance of a plan as of the close of a calendar 
year is not otherwise required under this title to be reported to a 
participant, a beneficiary, or the Secretary, such requirements shall 
include a requirement that the plan administrator or trustee shall 
notify the participant, the beneficiary, or the Secretary of such 
account balance at such time and in such manner as the Secretary may 
prescribe.''.
    (e) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2024.
            (2) Plan requirements.--The amendments made by subsection 
        (d) shall apply to years beginning after December 31, 2024.

SEC. 3. TRANSFER OF AMOUNTS TO TRUST FUNDS.

    There are hereby appropriated to each of--
            (1) the Federal Old-Age and Survivors Trust Fund, and
            (2) the Federal Disability Insurance Trust Fund,
established under section 201 of the Social Security Act (42 U.S.C. 
401) amounts equal to 50 percent of the increase in revenues to the 
Treasury by reason of the application of section 2.
                                 <all>
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