Important Notice of Proposed Law Changes

Your financial security is our priority and the relationship you have with New Direction Trust Company is very important to us. In that spirit we want to make you aware that Congress has proposed changes to the laws governing individual retirement accounts (IRAs) as part of their $3.5 trillion reconciliation package. These changes, if enacted into law, wilhave a direct, negative impact on you by limiting investment choices available to your individual retirement account, like the one you have today at New Direction Trust Company.

How would the proposed legislation affect my IRA?

As proposed, the legislation would prohibit IRAs from investing in privately-placed equity and debt securities and other investments where the IRA owner currently must be accredited .  If the proposed legislation is enacted, your IRA will no longer be allowed to own these investments in your IRA. Further, any IRA that currently holds those assets would be required to liquidate or distribute them by 12/31/2023, creating a potentially administrative and financial burden for many.

The bill also prohibits 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 of, or has control equivalent to those typically exercised by those positions, regardless of ownership percentage.  By way of example, IRA owned single-member limited liability companies or any investment in an entity in which the IRA owner is a director or officer could no longer be held in an IRA. We view this as a direct assault on investor’s ability to fund potentially innovative businesses, local entities and other creative forms of long-term wealth creation.

Suffice to say, 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 distribute 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 liquidated and must be distributed in-kind from the IRA.

What can you do?  Take Action Today, as Time is of the essence..

Make your voice be heard. Contact your elected officials in the United States House of Representatives and Senate, (particularly Democratic ones due to the current Congressional balance of power) and tell them:

  • You oppose limitations on IRA investment choice (Sections 138312 and 138314 of the House Reconciliation Bill).  These provisions have never been publicly vetted due to the procedural process being employed, and will have unintended and adverse impacts on countless Americans (and not just the “wealthy”) who wish to save for a secure retirement through the investments of their choice, both public and private.
  • The legislation:
  • Negatively impacts your ability to save for a secure retirement by limiting your choice and ability to diversify your retirement savings outside of the public stock market.
  • Will likely cause you significant negative financial consequences by forcing you to sell existing IRA investments at a depressed price by a publicized date certain, and may also cause significant negative tax consequences (including early distribution penalties) by forcing you to distribute from your IRA any investments that you are unable to sell.
  • You are also concerned that the legislation negatively impacts the ability of small businesses that employ everyday Americans to obtain the funding necessary to operate and grow their business and create jobs. The proposed legislation eliminates the ability of suitable investors to participate in private capital-raising transactions through their IRAs, a source of funding on which many of these small businesses rely.

Not sure how to contact your U.S. Congressional Representative? 

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Not sure how to contact your U.S. Senators?

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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.