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WASHINGTON – Rep. Virginia Foxx, R-N.C., has introduced no-cost, bipartisan legislation to correct a technical limitation preventing the rollover of tax-deferred retirement funds into existing SIMPLE IRA accounts.

“This legislation will simplify retirement planning and ensure a complex tax code does not prevent sensible financial planning decisions,” said Foxx. “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 known as a SIMPLE IRA. These plans were 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 two years of their existence compared to 10 percent for other IRAs. In order to prevent account holders from unknowingly rolling their IRA funds into SIMPLE IRAs and being surprised by an increased early withdrawal 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 two-year period, and consumers and financial planners have struggled with the rollover restrictions as they attempt to consolidate accounts.

H.R. 3050 would allow for rollovers into SIMPLE IRA accounts that have met the two-year threshold. The Joint Committee on Taxation has previously estimated this legislation would have a “negligible effect” on federal tax revenues.

Rep. John Larsen, D-Conn., is an original co-sponsor of Foxx’s legislation.  

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U.S. Rep. Virginia Foxx represents North Carolina’s 5th Congressional District and is the elected Republican Conference Secretary. Dr. Foxx is the chair of the House Education and the Workforce Subcommittee on Higher Education and serves as Vice Chair of the House Rules Committee.