Time To Streamline Simple IRA Rollovers

Floor Speech

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Ms. FOXX. Mr. Speaker, in 1966, Federal legislation established a new type of employer-sponsored retirement plan known as a SIMPLE IRA. These plans are designed to give small businesses a retirement option for their employees without the administrative burdens of other employer-sponsored retirement plan types.

SIMPLE IRAs face a 25 percent early withdrawal penalty during the first 2 years of their existence, compared to 10 percent for other IRAs. In order to prevent accountholders from unknowingly rolling their IRA funds into SIMPLE IRAs and being surprised by an increased early retirement penalty, current law prohibits rolling funds over into a SIMPLE IRA from other retirement accounts.

However, SIMPLE IRAs have the same early withdrawal penalty as other IRAs after that initial 2-year period, and consumers and financial planners have struggled with the rollover restrictions as they attempt to consolidate accounts.

This week, I will introduce legislation to allow for rollovers into SIMPLE IRA accounts that have met the 2-year threshold. The Joint Committee on Taxation has previously estimated this legislation would have a negligible effect on Federal tax revenues. This bill will simplify retirement planning and ensure a complex Tax Code does not prevent sensible financial planning decisions. Individuals should be able to consolidate their retirement funds in a way that best meets their needs.

This legislation is a small but important first step in the long road to ensuring our tax system works for Americans, not against them

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