A new bipartisan bill introduced in Congress last week could meaningfully change the way your clients make charitable donations in retirement — and spare them a tax-inefficient detour through an IRA rollover in the process.
The Charity Parity Act, introduced simultaneously in the House and Senate on Wednesday, would extend so-called qualified charitable distributions to employer-sponsored retirement plans, including 401(k), 403(b), and 457(b) accounts.
Under current law, QCDs – which allow individuals age 70½ or older to transfer funds directly to a qualifying nonprofit tax-free – are available only from individual retirement accounts.
The House version was introduced by Reps. Mike Kelly (R-Pa.) and Don Beyer (D-Va.), both members of the Ways and Means Committee, where the bill was referred. In the Senate, the legislation was sponsored by Sens. Kevin Cramer (R-N.D.) and Chris Coons (D-Del.), with Sens. Roger Marshall (R-Kan.) and Mark Warner (D-Va.) as original cosponsors. The Senate bill was sent to the Finance Committee.
"American retirement savers should not have to jump through unnecessary hoops to support charitable causes simply because their savings are held in a 401(k), 403(b) or other employer-sponsored retirement plan instead of an IRA," Brian Graff, CEO of the American Retirement Association, said in a statement supporting the prospective legislation.
The ramifications are significant for charitably inclined clients. Those who hold the bulk of their retirement savings in employer-sponsored plans currently face a cumbersome and potentially costly workaround: rolling assets into an IRA first, then executing a QCD from that IRA.
That process can trigger account-closing fees, outbound transfer fees, broker transfer fees, and charges imposed by the receiving IRA custodian. Clients with balances spread across multiple employer plans will have to execute that philanthropic two-step – and navigate the same fee tripwires – several times.
Read more: 401(k) rollovers fraught with challenges
The QCD mechanism has grown steadily in popularity since its creation under the Pension Protection Act of 2006. According to data published last month from FreeWill, QCD giving grew 56% in 2024 and an additional 47% in 2025, with 46% of surveyed organizations expecting donors to lean even more heavily on tax-efficient charitable vehicles in the year ahead.
For clients who choose to take a distribution before donating rather than using a direct trustee-to-charity transfer, mandatory federal withholding rules can whittle down the value of the gift and create additional administrative and tax-filing burdens. The Charity Parity Act would smooth out that friction by allowing direct transfers regardless of account type.
Tax attorney Richard Fox, founder of the Law Offices of Richard L. Fox in Gladwyne, Pa., and a specialist in philanthropic planning, called the proposal a modernization of existing rules rather than a sweeping new tax incentive.
"The bill essentially would eliminate what many view as an unnecessary rollover step and permit retirees to make direct charitable transfers regardless of the type of retirement account holding the assets," Fox told CNBC.
The legislation would build on the SECURE 2.0 Act's Legacy IRA Act provisions, which broadened QCD rules to include one-time elections for life-income gifts. The 2026 annual QCD limit is $111,000 per individual, meaning a married couple filing jointly could transfer up to $222,000 from their respective accounts in a single year, provided both accounts are eligible.
That eligibility gap is precisely what the Charity Parity Act addresses. Advisors whose clients hold substantial assets in 401(k) plans – particularly at large employers offering institutional pricing, diversified investment lineups, and retirement-income features that compare favorably to retail IRAs – would gain a straightforward charitable giving tool without requiring a plan-to-IRA rollover.
Data from Fidelity over the years has shown a continued rise in the ranks of 401(k) millionaires, with 654,000 such millionaires-next-door officially being counted as of September last year. According to the latest retirement savings snapshot by the Investment Company Institute, retirement assets in the US hit a new high of $49.1 trillion in December 31, including $19.2 trillion in IRAs and $10.1 trillion in 401(k) plans.
Fox noted that large employer plans increasingly offer sophisticated options that make them competitive with IRAs for retirees who choose to remain invested in them. When advising clients on whether to roll over their 401(k), advisors may increasingly need to factor charitable giving goals alongside investment and income considerations.
The bill has drawn broad support from nonprofit organizations, including the American Heart Association, United Way Worldwide, the Salvation Army, the National Council of Nonprofits, Mental Health America, the Association of Fundraising Professionals, the National Association of Charitable Gift Planners, and the American Cancer Society Cancer Action Network, among others.
It remains unclear at this point whether the legislation will advance through committee. Still, as retirement legislation continues to evolve post-SECURE 2.0, the Charity Parity Act reflects a broader policy direction: reducing friction between where Americans hold their savings and how they choose to deploy them in retirement.
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