Democrats introduced legislation on July 22 to limit mega-IRA accounts over $10 million, marking the third major push in five years to rein in tax-sheltered retirement wealth accumulation among the ultra-rich. Rep. Richard Neal of Massachusetts and Sen. Ron Wyden of Oregon, the top Democrats on the House Ways and Means and Senate Finance committees respectively, unveiled the bill to prevent high-income savers from exploiting tax incentives that were designed for ordinary workers.
The bill would prohibit further contributions to traditional or Roth IRAs once an individual’s combined retirement account balances—including 401(k)s and other defined contribution plans—reach $10 million. The income threshold for these restrictions applies to single filers earning more than $400,000 and married couples with incomes above $450,000.
For those who exceed the $10 million cap, the legislation requires mandatory distributions starting in 2034. Individuals would need to withdraw 50% of any balance above $10 million annually and pay taxes on those withdrawals. For amounts exceeding $20 million in Roth IRAs, the entire excess must be withdrawn, though Roth withdrawals are not taxed since they are made with after-tax dollars.
The scale of the problem the bill targets is substantial. According to data from the Joint Committee on Taxation released with the bill, just 208 individuals held a total of $85.1 billion in tax-sheltered retirement accounts as of the end of 2024, averaging $409 million per person. More than 32,000 individuals held more than $10 million each in such accounts, with an average balance of $17 million.
“Our retirement savings system is built on incentives to help workers achieve financial security after a lifetime of work—not on loopholes for the wealthiest to exploit,” Neal said in a statement. Wyden added that individuals worth hundreds of millions or billions of dollars “do not need any taxpayer subsidy to save,” and called for redirecting those subsidies toward working families.
The mega-IRA issue gained public prominence after a 2021 ProPublica investigation revealed that PayPal founder Peter Thiel had accumulated over $5 billion in a Roth IRA by investing in company shares that were initially valued very low. The strategy exploits a loophole: investors can undervalue private company shares when making IRA contributions, and if those shares later appreciate significantly, the gains grow tax-free inside the account.
This is not the first Democratic effort to address the issue. In 2021, similar provisions were included in the Build Back Better Act, which would have created required minimum distributions for accounts exceeding $10 million and eliminated “backdoor Roth” conversion strategies. That bill passed the House but stalled in the Senate and never became law. The Obama administration also proposed a cap on maximum benefits in IRAs and qualified plans, but it did not advance.
Mark Iwry, a former senior advisor to the Treasury secretary on retirement policy and now a nonresident senior fellow at the Brookings Institution, said the bill’s contribution restrictions would take effect for tax years beginning after December 31, 2026. “If the bill were enacted, starting next year any further IRA contributions by those taxpayers would be subject to a 6% excise tax,” Iwry explained.
The bill faces a challenging path in the current Republican-controlled Congress. However, if Democrats regain control of the House or Senate in 2027, Neal would likely become chair of the House Ways and Means Committee and Wyden would head the Senate Finance Committee, giving them substantially more leverage. Analysts suggest the proposal could resurface as part of a future SECURE 3.0 Act or other legislative package.
For now, the measure represents a signal about where Democratic lawmakers believe retirement policy should head. “When an idea keeps resurfacing across multiple administrations, it often reflects a long-term policy objective rather than a one-time legislative effort,” said Jeff Bush of The Washington Update. The bill underscores growing Democratic discomfort with unlimited tax-free or tax-deferred wealth accumulation inside retirement accounts, a concern that has persisted across three presidential administrations.
Sources
- ThinkAdvisor — details on the bill’s requirements, income thresholds, JCT data on account holders, and expert commentary from Mark Iwry on the 6% excise tax and implementation timeline.
- PlanSponsor — specifics on distribution requirements (50% annual withdrawal for amounts above $10 million, 100% withdrawal for Roth balances above $20 million), the tax impact of distributions, and historical context on prior Democratic proposals.
- NAPA-Net — the bill’s introduction by Neal and Wyden, income thresholds, JCT data on the 208 individuals holding $85.1 billion and 32,000+ individuals with $10 million+ balances, and quotes from Neal and Wyden on the bill’s purpose.
- CNBC — details on the Build Back Better Act’s 2021 provisions limiting mega and backdoor Roths.
- ProPublica — the 2021 investigation into Peter Thiel’s $5 billion Roth IRA and the mechanism of undervaluing private company shares.
