SMART Savings Act of 2026
- Sponsor
- Rep. Tenney, Claudia [R-NY-24]
- Committees
- Ways and Means Committee (primary)
- Last action
- Aug 3, 2026
Bottom line
The SMART Savings Act of 2026 aims to reduce regulatory burdens on individual retirement accounts by narrowing prohibited transaction rules, while attempting to preserve protections against direct self-dealing, including a new allowance for 'relationship benefits'.
What it actually does
This bill, titled the 'Simplifying Modern Access to Retirement Tools for Savings Act of 2026' or 'SMART Savings Act of 2026,' amends the Internal Revenue Code of 1986 to narrow the definition of 'plan' for purposes of prohibited transaction rules, effectively exempting individual account plans from certain of these rules. It also modifies the self-dealing prohibitions for individual retirement accounts (IRAs) by introducing a definition for 'relationship benefits' that would not trigger a self-dealing violation.
Proponents argue
Proponents argue that the current prohibited transaction rules are overly broad and create unnecessary compliance burdens for individual account plans, hindering efficient investment and increasing costs for savers. They contend that by streamlining these rules, the bill will simplify modern access to retirement tools, reduce administrative overhead, and encourage greater participation in retirement savings, ultimately benefiting individual investors by offering more flexibility and potentially lower fees. The preservation of self-dealing prohibitions, they would argue, maintains essential safeguards.
Opponents contend
Opponents would contend that narrowing prohibited transaction rules, even with the stated preservation of self-dealing prohibitions, could expose individual retirement account holders to increased conflicts of interest and potentially harmful investment advice. They might argue that 'relationship benefits' could incentivize financial advisors to steer clients towards certain products or services that benefit the advisor or their firm, rather than solely the client's best interest, thereby eroding investor protections and potentially leading to suboptimal retirement outcomes.
The bill is very short and can be read quickly, but its implications for complex tax and retirement law require careful consideration beyond a superficial reading.
Section 2(a)
Redefinition of 'Plan' for Prohibited Transaction Rules
This provision amends Section 4975(e)(1) of the Internal Revenue Code of 1986. It redefines the term 'plan' to specifically mean a trust described in section 401(a) (qualified trusts) or a plan described in section 403(a) (annuity plans), which are exempt from tax under section 501(a). This change effectively removes individual retirement accounts (IRAs) and other individual account plans from the scope of certain prohibited transaction rules under Section 4975.
Supporters argue
Proponents argue this redefinition simplifies the regulatory landscape for individual retirement accounts, reducing compliance costs for financial institutions and potentially leading to lower fees or more diverse investment options for IRA holders. They believe that the existing rules are overly complex and do not adequately distinguish between large, employer-sponsored plans and individual accounts.
Critics contend
Opponents would argue that removing IRAs from certain prohibited transaction rules could expose individual investors to greater risks of conflicts of interest and self-dealing by financial advisors. They contend that these rules are crucial for protecting unsophisticated investors from exploitative practices and ensuring that investment advice is solely in the client's best interest.
Tradeoffs
The provision balances the desire for regulatory simplification and reduced compliance costs for financial institutions against the need to protect individual investors from potential conflicts of interest and abusive practices in their retirement accounts.
Section 2(b)
Conforming Amendments to Prohibited Transaction Rules
This section makes several conforming amendments to Section 4975(c) and 4975(f)(8)(E) of the Internal Revenue Code. Specifically, it strikes paragraphs (3), (4), (5), and (6) from Section 4975(c) and redesignates paragraph (7) as (3). It also strikes clause (ii) from Section 4975(f)(8)(E) and redesignates clause (iii) as (ii). These changes align the structure of the prohibited transaction rules with the narrowed definition of 'plan' established in Section 2(a), removing provisions that would no longer apply to the redefined scope.
Section 2(c)
Preservation of Self-Dealing Prohibitions and 'Relationship Benefits' Definition
This provision amends Section 408(e)(2)(A) of the Internal Revenue Code, which deals with self-dealing in individual retirement accounts. It explicitly preserves the prohibition against an individual or their beneficiary dealing with plan assets for their own interest or account. Crucially, it introduces a new definition for 'relationship benefits,' stating that receiving 'reduced cost or no-cost products or services or enhanced or improved products or services or other benefits' based on the account value or fees of an IRA will *not* cause the account to cease being an IRA due to self-dealing.
The bill defines 'relationship benefits' as 'reduced cost or no-cost products or services or enhanced or improved products or services or other benefits received by a person pursuant to an arrangement in which the account value of, or the fees incurred for services provided to, an individual retirement account are taken into account for purposes of determining eligibility to receive such benefit.' These benefits are explicitly excluded from triggering self-dealing prohibitions for IRAs.
Section 2(c), amending IRC 408(e)(2)(A)(ii)
Why it matters:While presented as a clarification, the broad scope of 'other benefits' and its explicit exemption from self-dealing rules could be seen as a deliberate effort to provide significant flexibility to financial institutions, potentially minimizing public scrutiny of its full implications.
Case for: Proponents would argue this provides necessary legal certainty for financial institutions to offer common customer loyalty programs and bundled services, which are prevalent in other financial sectors. They believe it allows for innovation and competition in the retirement savings market without undermining core anti-fraud protections.
Case against: Opponents would argue that this broad definition could open the door to subtle but pervasive conflicts of interest. They might contend that tying benefits to account value or fees could incentivize advisors to push for higher-value accounts or more fee-generating services, potentially at the expense of the client's best interest, even if direct self-dealing is technically avoided.
Estimated impact: Potentially significant, as it could reshape how financial institutions structure their offerings and incentives for IRA clients, impacting millions of individual retirement accounts and billions in assets.