SMART Savings Act of 2026
- Sponsor
- Sen. Barrasso, John [R-WY]
- Committees
- Finance Committee (primary)
- Last action
- Jul 30, 2026
Bottom line
The bill aims to reduce regulatory burdens on individual retirement accounts by exempting them from certain prohibited transaction rules, while retaining prohibitions against direct self-dealing and clarifying the permissibility of specific relationship benefits.
What it actually does
This bill amends the Internal Revenue Code of 1986 to narrow the definition of 'plan' for the purpose of certain prohibited transaction rules, effectively exempting individual retirement accounts (IRAs) from most of these regulations. It also makes conforming amendments to align the code and explicitly clarifies that while direct self-dealing for IRAs remains prohibited, certain 'relationship benefits' offered by financial institutions are permissible.
Proponents argue
Proponents argue that the current prohibited transaction rules are overly broad and create unnecessary compliance burdens for individual account plans, hindering innovation and access to retirement savings tools. They assert that exempting these plans, while preserving core anti-fraud measures, simplifies administration and encourages greater participation in retirement savings, especially by allowing financial institutions to offer bundled services or benefits that might otherwise be deemed prohibited transactions.
Opponents contend
Opponents might contend that loosening prohibited transaction rules, even for individual accounts, could open the door to conflicts of interest and predatory practices by financial advisors or institutions, potentially exposing individual investors to undue risk or diminished returns. They might argue that the existing rules, while complex, serve as crucial investor protections that prevent self-serving transactions by fiduciaries.
The bill is very short and can be read quickly, but understanding its implications requires familiarity with complex tax and ERISA law.
Section 2(a) amending Section 4975(e)(1) of the IRC
Exemption of Individual Account Plans from Prohibited Transaction Rules
This provision significantly narrows the definition of 'plan' for the purpose of prohibited transaction rules under the Internal Revenue Code. Previously, the definition included individual retirement accounts (IRAs). The amendment restricts the definition to trusts described in section 401(a) (qualified employer plans) or plans described in section 403(a) (annuity plans), which are exempt from tax under section 501(a). This change effectively removes individual retirement accounts from the scope of most prohibited transaction rules.
Supporters argue
Supporters argue this streamlines the regulatory environment for IRAs, which are typically managed by individuals or their chosen advisors, distinct from employer-sponsored plans. They contend that the existing rules are overly burdensome for IRAs and that this change fosters innovation and reduces costs without sacrificing essential protections, especially since self-dealing prohibitions are retained.
Critics contend
Critics might argue that this exemption could weaken investor protections for IRA holders, making them more vulnerable to transactions that benefit financial institutions or advisors at the expense of the individual's retirement savings. They may contend that the complexity of financial products requires robust oversight, even for individual accounts.
Tradeoffs
The bill balances the desire to reduce regulatory burden and foster flexibility in the IRA market against the need to protect individual investors from potential conflicts of interest and abusive practices.
Section 2(b) amending Section 4975(c) and 4975(f)(8)(E) of the IRC
Streamlining Prohibited Transaction Rule References
These amendments remove specific paragraphs (3), (4), (5), and (6) from Section 4975(c) and redesignate paragraph (7) as (3). They also strike clause (ii) and redesignate clause (iii) as (ii) in Section 4975(f)(8)(E). These are technical changes that align the existing statutory language with the new, narrower definition of 'plan' by removing references to types of prohibited transactions that would no longer apply to the newly exempted individual account plans.
Section 2(c) amending Section 408(e)(2)(A) of the IRC
Retaining Self-Dealing Rules and Defining 'Relationship Benefits' for IRAs
This amendment revises the self-dealing rules for individual retirement accounts (IRAs). It explicitly states that if an individual or their beneficiary deals with plan assets for their own interest or account, or receives consideration from a party dealing with the plan, the IRA ceases to be an IRA. Crucially, it introduces and defines 'relationship benefits' as reduced-cost or no-cost products/services, or enhanced benefits, received when an IRA's value or fees are considered for eligibility. These 'relationship benefits' are explicitly excluded from what constitutes prohibited self-dealing, clarifying their permissibility.