SMART Savings Act of 2026: What Could It Mean for IRA Owners?
The short answer: The SMART Savings Act of 2026 proposes removing IRAs and certain similar accounts from the prohibited transaction rules under Internal Revenue Code Section 4975. However, the bill would preserve a separate rule prohibiting IRA owners and beneficiaries from using retirement assets for their own personal benefit.
The legislation could significantly change how IRAs, financial advisors, and service providers are regulated—but it has not become law. Current prohibited transaction rules remain fully in effect.
What is the SMART Savings Act of 2026?
SMART stands for Simplifying Modern Access to Retirement Tools for Savings.
Senator John Barrasso (R-WY) introduced the legislation as S. 5204, with Senator Marsha Blackburn (R-TN) serving as a co-sponsor. Representative Claudia Tenney (R-NY) introduced companion legislation in the House of Representatives.
The bill is supported by several financial-services organizations, including:
- Securities Industry and Financial Markets Association
- National Association of Insurance and Financial Advisors
- Finseca
- Insured Retirement Institute
- National Association for Fixed Annuities
- Financial Services Institute
- Investment Company Institute
According to its sponsors, the bill is intended to modernize the regulation of Individual Retirement Accounts, eliminate duplicative oversight, reduce costs, and expand access to financial products and services.
The proposed legislation would amend Internal Revenue Code Sections 4975 and 408. You can review the bill text published by Senator Barrasso, Senator Barrasso’s announcement, and Representative Tenney’s announcement.
What would the SMART Savings Act change?
The most significant change involves the definition of a “plan” under Internal Revenue Code Section 4975.
Current law applies Section 4975’s prohibited transaction framework to IRAs and several other tax-advantaged individual accounts. The SMART Savings Act would generally narrow that definition to certain employer-sponsored plans described under Sections 401(a) and 403(a).
As a result, IRAs and similar individual arrangements, including Health Savings Accounts, would generally be removed from Section 4975.
This would not mean that IRA owners could begin using their retirement assets for personal purposes. Instead, the proposal would preserve a separate self-dealing prohibition under Section 408.
Would prohibited transactions disappear for IRA owners?
No.
The SMART Savings Act would continue to prohibit an IRA owner or beneficiary from dealing with IRA income or assets in their own interest or for their own account.
If an IRA owner violated this self-dealing rule, the account could cease to qualify as an IRA as of the first day of the applicable tax year. That could result in the account being treated as distributed and create significant tax consequences.
Transactions that could continue to raise serious self-dealing concerns include:
- Using IRA-owned real estate personally
- Paying personal expenses with IRA funds
- Receiving personal compensation from a transaction involving IRA assets
- Using an IRA investment to obtain an immediate personal benefit
- Personally receiving consideration from another party involved in an IRA transaction
The introduced bill changes the regulatory structure, but it does not give IRA owners permission to treat retirement assets as personal assets.
How would the bill affect financial advisors and service providers?
Under current law, certain conduct by financial advisors, financial institutions, and IRA service providers may trigger Section 4975 in addition to securities, insurance, and other regulatory requirements.
The SMART Savings Act would generally remove IRA-related services from Section 4975. Oversight of those providers would instead be left primarily to regulators such as:
- The Securities and Exchange Commission
- The Financial Industry Regulatory Authority
- The Financial Crimes Enforcement Network
- State securities regulators
- State insurance regulators
For example, conflicted advice or excessive fees might no longer create a prohibited transaction under Section 4975 solely because an IRA is involved.
That does not necessarily make the conduct permissible. It may still violate securities laws, insurance regulations, consumer-protection laws, contractual obligations, or another applicable standard.
In other words, the bill would remove one regulatory layer—not all oversight.
What could this mean for self-directed IRA investments?
The proposal raises important questions for self-directed IRAs because alternative-asset transactions may involve people or businesses that are not overseen by the SEC, FINRA, or state insurance regulators.
This may be relevant to investments involving:
- Real estate
- Private companies
- Promissory notes
- Private equity
- Syndications
- Private lending
- Other alternative assets
For example, what happens when an IRA conducts business with a real estate professional, contractor, property manager, private sponsor, or another service provider that is not subject to the financial regulators emphasized by the bill’s supporters?
Additional guidance may be needed to determine how the proposed rules would apply to transactions involving relatives, controlled entities, closely held businesses, or unregulated service providers.
Self-directed IRA investors should therefore avoid assuming that the bill would make every previously restricted transaction permissible.
What are “relationship benefits”?
The SMART Savings Act would create an exception to the IRA owner self-dealing rule for certain “relationship benefits.”
The bill defines relationship benefits generally as reduced-cost or no-cost products or services, enhanced products or services, or similar benefits offered through an arrangement that considers:
- The value of an IRA
- The fees paid for IRA-related services
- The customer’s broader relationship with a financial institution
For example, a financial institution may offer preferred pricing or enhanced services to customers whose combined qualifying accounts meet a certain value. Under the proposal, including an IRA’s value when determining eligibility for those benefits would not automatically be treated as self-dealing by the IRA owner.
The relationship-benefit exception would not apply in the same manner to IRA annuities because the bill’s proposed self-dealing language applies to individual retirement accounts rather than individual retirement annuities.
Would the bill change the rules for rollover advice?
Not directly.
Advice provided to a workplace retirement plan participant about whether to roll plan assets into an IRA is generally advice concerning the workplace plan before the rollover occurs. Because the SMART Savings Act focuses on IRAs and similar individual arrangements, it would not resolve every fiduciary question involving rollover recommendations.
The definition of an investment-advice fiduciary remains important. Current federal regulations use a multi-part test to determine when someone is providing fiduciary investment advice.
Legal challenges involving that standard could affect rollover recommendations and other retirement-plan assistance independently of the SMART Savings Act.
What should self-directed IRA investors know?
If enacted, the SMART Savings Act could substantially change the federal framework governing IRA transactions. However, several important principles would remain.
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The bill is not currently law
Existing IRA prohibited transaction rules remain in effect. IRA owners must continue following the law as it exists today.
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IRA owner self-dealing would remain prohibited
An IRA owner or beneficiary could not use retirement assets for personal benefit. Violating this restriction could cause the account to lose its tax-advantaged status.
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Oversight of financial institutions would shift
Many issues involving advisors and regulated service providers would be handled by their primary regulators rather than through Section 4975.
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Certain relationship benefits could become permissible
Financial institutions could potentially consider IRA assets when determining eligibility for fee discounts, preferred pricing, or enhanced services.
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Alternative-asset transactions may require more clarity
Real estate and other private investments frequently involve parties outside traditional financial-services regulation. Investors would need to understand how the final law and any accompanying guidance apply to those transactions.
What is the outlook for the SMART Savings Act?
The SMART Savings Act has support from several prominent financial-services organizations, but its passage is uncertain.
Retirement-advice regulation remains politically contested. Supporters argue that the proposal would eliminate duplicative regulation, lower costs, and give IRA owners access to better products and services. Opponents may argue that removing IRAs from Section 4975 could weaken protections against conflicted conduct or leave regulatory gaps.
The bill may also be revised as it moves through the legislative process. IRA owners and financial professionals should evaluate the final statutory language, effective date, and regulatory guidance if the legislation advances.
Frequently Asked Questions
Is the SMART Savings Act of 2026 currently law?
No. It is proposed federal legislation. Current IRA prohibited transaction rules remain in effect unless Congress passes the bill, the president signs it, and its provisions become effective.
Would the bill let IRA owners use IRA assets personally?
No. The bill would preserve a self-dealing rule that could disqualify an IRA if its owner or beneficiary uses IRA income or assets for personal benefit.
Would the bill eliminate oversight of financial advisors?
No. Financial advisors and institutions could remain subject to securities, insurance, financial-crime, state, consumer-protection, and other applicable laws. The proposal would generally remove the additional prohibited transaction framework under Section 4975 for IRA-related conduct.
Could an IRA count toward relationship pricing?
Potentially. The proposed relationship-benefit provision could allow IRA account values or fees to be considered when determining eligibility for reduced costs, preferred pricing, or enhanced services.
Would the bill affect self-directed IRAs invested in real estate?
Potentially. The IRA owner self-dealing restriction would remain, but the treatment of other parties and service providers could change. Transactions involving personal use, relatives, controlled entities, compensation, or unregulated service providers would still require careful review.
The bottom line
The SMART Savings Act of 2026 proposes a major shift in IRA regulation. It would generally remove IRAs from the prohibited transaction framework under Section 4975 while preserving a direct prohibition against self-dealing by IRA owners and beneficiaries.
Supporters believe the bill would reduce overlapping regulation, lower costs, and expand access to financial services. At the same time, the proposal raises important questions for alternative-asset transactions and service providers that may not be overseen by traditional financial regulators.
For now, the rules have not changed. IRA owners should continue following existing prohibited transaction requirements and consult qualified legal and tax professionals before entering any transaction involving retirement assets.
This article is provided for educational purposes only and does not constitute legal, tax, investment, or financial advice. uDirect IRA Services does not provide legal, tax, or investment advice or endorse any investment.
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This material is provided for educational purposes and is not tax, legal, or investment advice. uDirect IRA Services does not endorse investments or investment sponsors.