Your financial security is our priority and the relationship you have with New Direction Trust Company is very important to us. That’s why we want to make you aware that the United States House of Representatives has proposed changes to the laws governing individual retirement accounts (IRAs) as part of its $3.5 trillion reconciliation package. These changes, if enacted into law, would have a direct negative impact on you and your ability to save for a secure retirement through an individual retirement account, like the one you have at New Direction Trust Company.
The proposed legislation would prohibit IRAs from holding privately-placed equity and debt securities and other investments that require IRA owners to meet minimum financial, educational, or licensing requirements. For example, the legislation would prohibit IRAs from holding unregistered investments that are offered to accredited investors, like equity or debt investments in small businesses or investments in private funds. You may already hold investments in your IRA today that would be prohibited by the proposed legislation.
The bill would also prohibit IRA owners from investing in (1) non-publicly traded entities in which the IRA owner and related entities (including the IRA itself) own more than a 10% interest or (2) any entity in which the IRA owner is an officer or director, regardless of ownership percentage. By way of example, single-member limited liability companies or any investment in an entity in which an individual is a director or officer could no longer be held in an IRA. IRAs holding any of the above investments would lose all of the tax advantages previously available to the IRA.
If the proposed legislation is enacted, you will no longer be able to purchase any of the above investment types in your IRA. Further, you will be required to dispose of any such investments that you currently hold in your IRA by no later than December 31, 2023, which could result in significant and previously unforeseen financial and tax consequences, including taxes and penalties associated with any assets that could not be sold or liquidated and must be distributed in-kind from the IRA.
We want you to know that we are working closely with our third-party advisors in Washington D.C., along with other major industry participants with the goal of having these provisions removed from the reconciliation package. Know that, as always – we will continue to be a strong advocate for investor choice. We also want you to feel secure in knowing that our company is well-positioned to continue to succeed, no matter the outcome of the proposed legislation.
Make your voice heard. Contact your elected officials in the United States House of Representatives and Senate, and tell them:
On a personal level, the legislation:
At New Direction Trust Company, as always – we will continue to advocate on your behalf for individual investor choice. If you have any questions about Sections 138312 and 138314 of the House reconciliation bill and how it will impact you, please contact your financial or tax advisor.