Congress Tables 'Mega-IRA' Bill: What SDIRA Holders Need to Know About the Proposed $10 Million Cap

The 'Mega-IRA' Bill: Understanding What's Actually Proposed

The self-directed IRA community got a jolt in late July 2026 when lawmakers introduced legislation targeting large retirement accounts. The bill -- introduced by Senator Ron Wyden of Oregon and Representative Richard Neal of Massachusetts -- made national headlines, but the details matter enormously to SDIRA investors.

Here is what the proposed legislation would actually do:

• Impose mandatory minimum distributions on retirement accounts with combined balances exceeding $10 million
• Place contribution restrictions on high-income taxpayers above the $10 million threshold
• Not prohibit SDIRAs, private investments, real estate holdings, IRA/LLC structures, or alternative assets
• Not apply to the vast majority of self-directed IRA investors

The bill targets accounts that have grown substantially through investments in private companies before those companies became publicly traded. For the overwhelming majority of SDIRA investors, this legislation -- even if passed -- would have no practical impact.

DOL's Proposed Rule: Alternatives in 401(k) Plans

In March 2026, the Department of Labor issued a proposed rule that could reshape how alternative assets are treated in 401(k) plans. The rule creates a fiduciary "safe harbor" framework: if plan sponsors follow a thoughtful, well-documented process for evaluating alternative investments, that decision is considered prudent even if the investment is complex.

Key requirements under the proposed framework include:

• Evaluating expected performance on a risk-adjusted basis
• Analyzing fees in the context of value delivered
• Ensuring sufficient liquidity for participant needs
• Adopting reliable valuation processes for private assets
• Maintaining meaningful benchmarks for comparison

The rule remains in its comment period and could evolve significantly before finalization.

2026 SDIRA IRS Compliance Essentials

Regardless of legislative developments, SDIRA investors face ongoing compliance obligations that are unchanged for 2026. A single prohibited transaction can disqualify an entire IRA and trigger immediate taxes and penalties on the full account balance.

Key 2026 Compliance Rules

• Prohibited Transactions (IRC 4975): Your IRA cannot transact with disqualified persons -- you, your spouse, lineal descendants and ascendants, and entities you control at 50% or more.
• Required Minimum Distributions: Under SECURE 2.0, RMDs for Traditional IRAs now begin at age 73. The RMD age is scheduled to increase to 75 in 2033. Roth IRAs do not require RMDs during the original owner's lifetime.
• UBIT/UDFI: Unrelated Business Taxable Income can apply if the IRA invests in an active business. Unrelated Debt-Financed Income applies when the IRA uses leverage. The top UBIT rate of 37% applies to taxable amounts above approximately $16,000.
• Form 5498: Your custodian files this annually, reporting the fair market value of SDIRA assets as of December 31. Clients must provide year-end valuations for illiquid alternative assets.
• Form 990-T: Required if your SDIRA owes UBIT or UDFI taxes. This is the account holder's responsibility.
• Non-Recourse Loans: Any financing used to purchase real estate inside an IRA must be non-recourse -- you cannot personally guarantee the loan.

New in 2026: Form 1099-DA for Crypto

Beginning with 2025 transactions, SDIRA custodians are now required to file Form 1099-DA, reporting digital asset activity to the IRS in significantly greater detail than previous requirements. SDIRA investors holding cryptocurrency should confirm with their custodian how this reporting affects their year-end statements, ensure all valuations are properly documented, and be aware that the IRS has increased audit activity around Roth conversions involving crypto valued at market lows.

IRA/LLC Compliance in 2026

Self-directed IRA LLCs -- often called Checkbook IRAs -- carry their own ongoing compliance obligations: annual state filings, year-end fair market value reporting to the custodian, and heightened vigilance around prohibited transactions when the account holder has direct checkbook control.

The Bottom Line on Compliance

The compliance landscape for SDIRAs in 2026 is demanding but navigable for investors who work with knowledgeable custodians and qualified tax professionals. Documentation, proper titling, and clean transaction structures remain your best protection.

This article is for informational purposes only. Consult a qualified tax advisor, attorney, or SDIRA specialist before making any investment or compliance decisions.