Key Democrats propose caps on large retirement account balances 

September 30, 2026

Legislation introduced by the top Democrats on House and Senate tax committees aims to curb perceived abuse of tax-favored retirement accounts by high-income individuals. The proposal calls for capping contributions and mandating distributions from large account balances consisting of amounts in employer-sponsored defined contribution (DC) plans and individual retirement accounts (IRAs). Although the legislation won’t advance in the Republican-controlled 119th Congress, it provides an important signal of Democratic retirement policy priorities next year if control shifts following the November elections.

The proposal, from Senate Finance Committee Ranking Member Ron Wyden, D-OR, and House Ways and Means Committee Ranking Member Richard Neal, D-MA, revives legislative language targeting “mega-retirement accounts” that appeared in earlier Democratic tax packages, including portions of the Biden Administration's budgets and a 2021 House-passed budget bill. 

Under the proposal, high-income taxpayers with combined DC plan and IRA balances exceeding $10 million (annually indexed) could not make additional contributions to a traditional or a Roth IRA, starting in 2027. Excess contributions would be subject to a 6% excise tax. High-income taxpayers would be defined as those earning at least $225,000–$450,000 (annually indexed), depending on their filing status.

Starting in 2034, these individuals would also face steep minimum distributions if their combined balances in tax-preferred accounts exceeded $10 million (annually indexed). The minimum distribution would generally be 50% of the excess amount. If aggregate balances exceeded $20 million (annually indexed), high-income taxpayers would be subject to mandatory distributions from Roth accounts to bring the total balance down to $20 million (but not more than the aggregate balance in all Roth accounts). These mandatory distributions would be allocated first to Roth IRAs, then designated Roth accounts. Taxpayers could choose from which accounts to take any additional distributions necessary to satisfy the 50% minimum distribution. Employers would have to allow affected participants to take distributions from their plans to satisfy the requirements.

Notably, the new measure omits provisions from the 2021 bill that sought to ban conversions of employee after-tax contributions in qualified retirement plans and require employers to annually report DC account balances exceeding $2.5 million to the IRS. Another provision in the 2021 bill but not in the new proposal would have barred all Roth conversions, including ordinary rollovers, for high earners.

The bill represents an ongoing effort by congressional Democrats to distinguish between tax-favored accounts intended to help middle-class retirement savers and accounts that have evolved into substantial wealth accumulation vehicles.

“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,” Rep. Neal said in a related press release. “Allowing a handful of individuals to accumulate staggering fortunes while still receiving taxpayer subsidies was never what Congress intended.”

If Democrats win control of the House and/or Senate next year, employers should expect this and other proposals targeting high-balance accounts and perhaps Roth conversions to become a larger focus of the broader retirement policy conversation.

• S 5040, a bill to amend the Internal Revenue Code of 1986 to impose limitations on high-income taxpayers with large retirement account balances (Congress, July 22, 2026) 
• Summary of provisions (Senate Finance Committee, July 22, 2026)
• Press release, Wyden, Neal Introduce Bill to Crack Down on Mega Retirement Account (Congress, July 22, 2026)

• House OKs Roth conversion ban, tax hit for some DB plan sponsors (November 19, 2021)