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A Wall Street Journal article on Tuesday identified startup founders and Silicon Valley insiders who have built multimillion-dollar retirement account balances by investing in companies like Roblox and Nvidia before they went public. Two Democratic lawmakers want to put limits on the size of these accounts.
The legislation proposed this week by Sen. Ron Wyden (D., Ore.) and Rep. Richard Neal (D., Mass.), the party’s top tax-law writers, faces long odds of passage in a Republican-controlled Congress. But it signals the measure could be a priority if Democrats take control of Congress in November.
Here’s what the bill would do:
It would apply only to individuals with modified adjusted gross incomes above $400,000 and married couples with incomes above $450,000 who have account balances over $10 million.Those with tax-advantaged account balances totaling more than $10 million would be barred from contributing to Roth or traditional individual retirement accounts.They would also have to withdraw half of their retirement account balance over $10 million annually and pay any taxes due. For someone with $12 million in 401(k)s and IRAs, the required payout would be $1 million. If the money is taken from a traditional account, it could produce a federal income tax bill of $370,000.Those with balances above $20 million would have to withdraw the excess in full from Roth IRA and Roth 401(k)-type accounts. That means someone with a $100 million Roth IRA would have to withdraw $80 million.If approved by Congress, the proposed law would become effective after 2033.
Here’s the context:
Tax breaks for IRAs and 401(k)-style retirement accounts are among the biggest on the government’s books, amounting to about $249.6 billion in revenue the U.S. government didn’t collect in 2025, according to the nonpartisan congressional Joint Committee on Taxation.Democrats have long tried to curtail how much of these tax breaks go to people holding the largest balances. Wyden and Neal have proposed similar legislation in the past and Presidents Joe Biden and Barack Obama included measures designed to restrict account sizes in budget proposals that were never enacted.If the Democrats win majorities in Congress, Wyden and Neal are poised to become chairmen, respectively, of the Senate Finance Committee and the House Ways and Means Committee, which have jurisdiction over federal tax laws.Under Biden, Democrats also sought to limit the size of retirement accounts by banning them from holding unregistered securities, including private equity. Under President Trump, the Labor Department has proposed a regulation designed to make it easier for employers to offer their workers access to investments in privately held companies through workplace retirement plans.
Write to Anne Tergesen at [email protected] and Theo Francis at [email protected]