News Home

Washington D.C.  – Today, Congresswoman Virginia Foxx introduced H.R. 5672, no-cost, bipartisan legislation to correct a technical limitation preventing the rollover of tax-deferred retirement funds into existing SIMPLE IRA accounts.  Representative Foxx released the following statement after introducing the legislation:

“This legislation will simplify Americans’ 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 on the long road to ensuring our tax system works for Americans, not against them.” 

In 1996, federal legislation established a new type of employer sponsored retirement plan, SIMPLE IRAs.  These plans were designed to give small employers a straightforward retirement plan option for employees without the administrative burdens of other employer-sponsored retirement plan types.  SIMPLE IRAs have served employers and employees very well in the years since.

Despite the benefits of consolidating retirement funds in certain circumstances, current law prohibits rolling funds over into SIMPLE IRAs from other retirement accounts, due to the fact that SIMPLE IRAs face a 25% early withdrawal penalty during the first two years of their existence (versus 10% for other IRAs).  Lawmakers rightly wanted to prevent account holders from unknowingly rolling their IRA funds into SIMPLE IRAs and being surprised by an increased early withdrawal penalty.  After that initial two year period, however, SIMPLE IRAs have the same early withdrawal penalty as other IRAs.. 

Consumers and financial planners have struggled with the rollover restrictions as they attempt to consolidate accounts, so H.R. 5672 would allow for rollovers into SIMPLE IRA accounts that have met the two-year threshold.  The Joint Committee on Taxation had previously estimated this legislation would have a “negligible effect” on federal tax revenues. 

This legislation is supported by the National Association of Insurance and Financial Advisors (NAIFA). 

# # #

Congresswoman Virginia Foxx is currently in her fifth term as the Representative of North Carolina’s Fifth Congressional District and is the elected Republican Conference Secretary.  Dr. Foxx is the chair of the House Education & the Workforce Subcommittee on Higher Education and serves as Vice Chair of the House Rules Committee.

# # #