A new bipartisan bill introduced in Congress this week would allow older Americans to make tax-free charitable donations directly from their 401(k) and other workplace retirement plans, eliminating the need to first roll over funds into an individual retirement account.
The measure, known as the Charity Parity Act, was unveiled Wednesday in both the House and Senate. It seeks to expand qualified charitable distributions, or QCDs, which currently are restricted to IRAs for individuals age 70½ or older.
Under existing rules, retirees holding savings in a 401(k) or similar plan must transfer the money to an IRA before directing it to a qualifying nonprofit. The proposed legislation would remove that step, allowing direct transfers from employer-sponsored accounts.
"American retirement savers should not have to jump through unnecessary hoops to support charitable causes simply because their savings are held in a 401(k), 403(b) or other employer-sponsored retirement plan instead of an IRA," said Brian Graff, CEO of the American Retirement Association, in a statement issued with the bill's introduction.
The bills were referred to the House Ways and Means Committee and the Senate Finance Committee, though their prospects for passage remain unclear at this stage.
QCDs originated in 2006 under the Pension Protection Act. They let qualifying donors transfer funds straight to charities without counting the distribution as taxable income, which can help avoid higher Medicare premiums tied to income-related monthly adjustment amounts for Part B and Part D coverage.
These distributions also satisfy required minimum distributions that begin at age 73. For 2026, the annual limit stands at $111,000 per person, allowing a married couple filing jointly to transfer up to that amount from each spouse's account.
Tax attorney Richard Fox, founder of the Law Offices of Richard L. Fox in Gladwyne, Pennsylvania, described the change as a practical modernization rather than a sweeping new incentive.
"The proposal is less about creating a major new charitable tax incentive and more about modernizing the rules to reflect current retirement planning realities," Fox said. "The bill essentially would eliminate what many view as an unnecessary rollover step and permit retirees to make direct charitable transfers regardless of the type of retirement account holding the assets."
Fox noted that large employer plans increasingly offer institutional pricing, sophisticated investment choices, and annuity options that compare favorably to retail IRAs, encouraging retirees to keep assets in place rather than move them.
According to Vanguard data, most 401(k) plans permit participants to leave funds after retirement, with only about 2 percent requiring a rollover by age 65 or 70, a figure that has stayed low since 2014 when it stood at 4 percent.
The new legislation joins a separate bipartisan effort that would permit QCDs from IRAs to be directed to donor-advised funds, an option currently prohibited. Donor-advised funds allow donors an immediate tax deduction while recommending grants to charities over time.
Supporters argue the changes align with evolving retirement patterns where workers often accumulate significant balances in workplace plans. Critics of the current restrictions have long pointed to the administrative burden of mandatory rollovers for those seeking to support nonprofits.
If enacted, the Charity Parity Act would broaden access to a giving strategy that has grown in popularity since its creation nearly two decades ago, particularly among retirees looking to manage taxable income and fulfill charitable goals simultaneously.