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Bill

S 5204

SMART Savings Act of 2026

119th Congress Introduced by John Barrasso and 2 co-sponsors

The bill broadens what counts as a “plan” for prohibited transactions and relaxes certain prohibitions for tax-exempt 401(a)/403(a) plans.

Introduced in Senate
3
WeVote Research Nonpartisan
Bill Summary · S 5204

Overview

  • Bill: S. 5204, the SMART Savings Act of 2026
  • Purpose: Amend the Internal Revenue Code to exempt certain individual account plans from certain prohibited transaction rules.
  • Introduced in: Senate, July 30, 2026 (Senator Barrasso, with Senators Blackburn, Daines as co-sponsors)
  • Current status: Referred to the Senate Committee on Finance

Main purpose and intent

  • The act seeks to simplify access to retirement tools by removing or relaxing specific prohibited transaction rules that currently apply to certain individual account plans.
  • Specifically, it aims to ensure that trusts described in 401(a) plans and certain 403(a) plans that are tax-exempt under 501(a) are treated as plans for purposes of prohibited transaction rules, thereby exempting them from those rules.

Key provisions and changes

  1. General definition of “Plan” (Section 2(a))

    • Amends section 4975(e)(1) to define a “plan” as:
      • A trust described in section 401(a) forming part of a plan, or
      • A plan described in section 403(a),
      • If the trust or plan is exempt from tax under section 501(a).
    • This broadens the scope of what is considered a plan for purposes of prohibited transactions.

  2. Conforming amendments to prohibited transaction provisions (Section 2(b))

    • Amends section 4975(c) by:
      • Striking out paragraphs (3)–(6) and redesignating paragraph (7) as paragraph (3). This effectively reduces or reorganizes the list of existing prohibited transaction exceptions/remedies (exact removals depend on current text of the code).
    • Amends section 4975(f)(8)(E) by:
      • Striking clause (ii) and redesignating clause (iii) as clause (ii). This alters the list of rules governing the application of prohibited transactions in certain contexts.

  3. Preservation of self-dealing prohibitions (Section 2(c))

    • Retains and clarifies self-dealing protections under section 408(e)(2)(A) but with modifications:
      • If, in any taxable year, an IRA is established and the individual or beneficiary engages in self-dealing with the plan’s income or assets for their own benefit (or receives related benefits from a party dealing with the plan), the IRA ceases to be an IRA as of the first day of that taxable year.
      • Definitions provided:
      • The account creator is the individual for whom the account was established.
      • Separate accounts or plans (in employers/employee associations) are treated as separate IRAs or contracts for purposes of this calculation.
      • “Relationship benefits” are defined as certain favorable terms (reduced cost, no cost, enhanced or improved products/services, or other benefits tied to the account value or fees).

  4. Effective date (Section 2(d))

    • The amendments apply to transactions occurring after the date of enactment of the Act.

Who would be affected

  • Individual retirement accounts (IRAs) and related plans described in 401(a) and 403(a) that are tax-exempt under 501(a).
  • Entities and individuals participating in or administering such plans, particularly in contexts involving prohibited transactions and self-dealing rules.
  • The changes could affect fiduciaries, custodians, and financial institutions handling these accounts by altering or removing certain prohibited-transaction restrictions.

Procedural and timeline aspects

  • Introduced in the 119th Congress and referred to the Senate Committee on Finance.
  • Effective date: Prospective; applies to transactions after enactment.
  • The bill would require congressional action (passage and enactment) to become law and alter current tax code statutory prohibitions.

Potential impact (high-level)

  • By expanding what is considered a “plan” for prohibited-transaction purposes and simplifying or removing certain prohibitions, the bill could:
    • Reduce regulatory friction for certain retirement accounts.
    • Potentially increase flexibility for plan investments and transactions involving these accounts.
    • Require careful consideration of self-dealing protections to ensure beneficiaries remain shielded from improper related-party transactions.

Note: The precise impact depends on final enacted language and how the conforming amendments interact with existing exclusions and prohibitions in Sections 4975 and 408.

Compiled from official sources — confirm details with the bill’s official record.

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