A bipartisan, bicameral bill introduced this week would let Americans age 70½ and older make tax-free charitable gifts directly from employer-sponsored retirement accounts such as 401(k)s, removing the need to first roll those balances into an IRA. The change could simplify giving for retirees and reduce unintended tax or Medicare-cost consequences tied to forced rollovers.
What the Charity Parity Act would do
The proposed Charity Parity Act, filed in both the House and Senate, would expand the rules for qualified charitable distributions — commonly called QCDs — so that they can be sent straight from workplace retirement plans, not just from individual retirement accounts. Currently, only IRAs may make QCDs directly to qualifying nonprofits; sums in a 401(k) must be rolled into an IRA first to qualify.
Advocates argue the change removes an unnecessary administrative step and better reflects how many Americans now hold retirement assets. The bills were referred to the House Ways and Means Committee and the Senate Finance Committee, where they will face the usual legislative review and debate.
Why this matters to donors and retirees
QCDs let eligible donors transfer money to charities without counting the distribution as taxable income. That can matter beyond income tax calculations: higher reported income can trigger larger Medicare Part B and Part D premiums through income-related monthly adjustment amounts, known as IRMAA.
QCDs can also satisfy required minimum distributions — the withdrawals required from many retirement accounts starting at age 73 — while avoiding the income hit of taking a distribution and then donating the proceeds.
- Who can use QCDs: Individuals age 70½ and older (under current rules).
- Accounts affected: Proposal would add 401(k), 403(b) and similar employer-sponsored plans to the list of eligible sources.
- 2026 annual limit: The current QCD cap is $111,000 per person for 2026.
- Tax effect: Qualified distributions are excluded from taxable income and may count toward RMDs.
- Legislative status: Referred to Ways and Means (House) and Finance (Senate); outcome and timing uncertain.
“Retirement savers shouldn’t have to move money between accounts just to support charities,” said Brian Graff, CEO of the American Retirement Association, in a statement when the bills were filed. Experts in philanthropic tax planning describe the measure as a modernization of rules rather than a new tax incentive.
Richard Fox, a tax lawyer who specializes in charitable planning, told reporters the bill would remove a procedural hurdle for donors and better align tax rules with current retirement practices. He noted many large employer plans now offer features that make participants want to keep money in-plan rather than roll it into IRAs.
How this fits with other charitable giving proposals
The Charity Parity Act complements a separate bipartisan effort that would allow QCDs to be directed into donor-advised funds (DAFs), a change that’s currently prohibited. DAFs let donors take an immediate tax deduction for contributions to the fund and recommend grants to charities over time.
Allowing QCDs from workplace plans and permitting transfers to DAFs would together broaden the flexibility of tax-advantaged charitable giving, particularly for older Americans with sizable retirement balances held outside IRAs.
At the same time, the changing design of 401(k) plans — more institutional pricing, annuity options and flexible distribution arrangements — means more retirees are keeping assets in their employer plans. Vanguard data show only a small share of large plans require participants to move balances by retirement; that percentage has declined in recent years.
For readers watching this space: the practical effect depends on whether either chamber’s committee advances the bills and whether final language is altered in committee or conference. Any changes could be accompanied by budgetary analyses that influence lawmakers’ decisions.
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