Advisers write, FSI gripes, IRA provision spiked

The troublesome provision about inherited IRAs that had been part of highway legislation under consideration in the Senate was stripped Wednesday after more than 2,000 financial advisers weighed in over the past week with their opposition, according to the Financial Services Institute. The provision, introduced last week by Sen. Max Baucus, D.-Mont., would have raised $4.6 billion over a decade by no longer allowing everyone to defer paying taxes over their lifetimes on individual retirement accounts they inherit. Instead, only a spouse, minor child or disabled beneficiary would get this benefit, while all others would have to pay taxes on the account within five years. Senate Majority Leader Harry Reid, D.-Nevada, amended the bill so that inherited IRAs would continue to be taxed over a lifetime. Accountant Robert Keebler said Mr. Baucus' provision “would have been devastating for individuals with large IRAs” and essentially would have broken the promise Congress made to Americans years ago that allows for the deferral of IRA funds over the life of their beneficiaries. Is this the end of the issue? Mr. Keebler warned that there is a “reasonable prospect” that this revenue-generating proposal will come up again. An FSI spokesman, though, said he takes it as a “good sign” that it was the Senate majority leader himself who took action against the measure. Over the past week, FSI mobilized members against the provision and its staff advocated for it to be removed. Dale Brown, FSI chief executive: “With the provision requiring beneficiaries to pay taxes over five years, instead of spreading them over their lifetime, this would have greatly deterred saving at a time in our nation's history when saving is already strained to say the least.”