Senate bill would accelerate retirement plan distributions

Distributions from retirement plans such as 401(k) plans generally would have to be made to designated beneficiaries within five years after the death of the account holder under legislation unveiled Wednesday by Senate Finance Committee Chairman Ron Wyden, D-Ore.

The only exceptions to that new five-year distribution requirement would be for beneficiaries who are within 10 years of the account holder’s age, an individual with special needs or disabled, a minor or the account holder’s spouse.

While current law requires account holders to take retirement plan distributions starting at age 70½, the requirement “is designed to close an estate-tax planning loophole,” according to a committee staff summary of the provision, which is part of the broader Preserving America’s Transit and Highways Act, a highway funding measure.

The provision would raise $3.7 billion over the next 10 years, according to a Joint Committee on Taxation estimate.

The Finance Committee is expected to vote on the broader bill sometime next month.