GAO Updates and Reissues IRA Report

By Nevin Adams • October 31, 2014 • 0 Comments
The Government Accountability Office (GAO) recently reissued its preliminary report on individual retirement account (IRA) accumulations.

As it had indicated in a statement to the Senate Finance Committee in September, for tax year 2011 (the most recent year available) GAO noted that an estimated 43 million taxpayers had individual retirement accounts (IRA) with total reported fair market value of $5.2 trillion. The report also indicated that nearly all (about 99%) of those taxpayers had aggregate IRA balances (including inherited IRAs) of $1 million or less. 

The report was amended to revise the estimated individual retirement account and defined contribution plan accumulations for GAO’s illustrative contribution scenarios with balances invested in an S&P 500 portfolio. According to the report, the original estimates used a price index that did not include reinvested dividends.

As for why GAO conducted the initial study, the report explains that this year the federal government will forgo an estimated $17.5 billion in tax revenue from IRAs, and that while Congress limited annual contributions to IRAs to prevent the tax-favored accumulation of “unduly large balances,” concerns had been raised that tax benefits accrue primarily for higher-income individuals. 

Of course, as the GAO report notes, there is no total statutory limit on IRA accumulations or rollovers from employer defined contribution plans. Moreover, GAO said that it would take “unusually large individual and employer contributions sustained over decades and rolled over from an employer plan” to accumulate an IRA balance over $5 million.   

However, GAO did determine that an individual who made the maximum contributions every year since 1975 to a  IRA could have accumulated about $303,000 — achieving investment returns equal to the average annual Social Security interest rates. For a Roth IRA, the maximum contributions for 1998 to 2011 would be $57,000, according to the report.

GAO said that it will release a separate report with its final results on individual retirement accounts later this fall.