Congress moves to unlock 401(k) charitable donations

21 May 2026, 02:07 · The Fresno Bee

Millions of retirees hold their savings in 401(k) plans, but cannot use those funds for tax-free charitable donations under current federal law. A bipartisan bill introduced in both chambers of Congress on May 13, 2026, would change that.

The Charity Parity Act would let individuals aged 70½ and older make qualified charitable distributions directly from employer-sponsored retirement plans, including 401(k), 403(b), and 457(b) accounts, to eligible nonprofits without first rolling the funds into an IRA.

That IRA rollover requirement has been the only path to tax-free charitable giving from retirement accounts since Congress created QCDs in 2006, and it carries fees, processing delays, and paperwork that discourage donations. The bill aims to strip away that barrier entirely.

Charity Parity Act would extend tax-free charitable giving to 401(k) plans

The Charity Parity Act legislation was introduced simultaneously in the House and Senate on May 13, 2026, with bipartisan backing from both chambers.

Representatives Mike Kelly (R-Pa.) and Don Beyer (D-Va.) introduced the House version, while Senators Kevin Cramer (R-N.D.) and Chris Coons (D-Del.) sponsored the Senate companion, with Senators Roger Marshall (R-Kan.) and Mark Warner (D-Va.) as original cosponsors, CNBC reported.

The Charity Parity Act would reinforce recent bipartisan successes and encourage additional giving by providing equal treatment for savers wishing to donate to charity regardless of the type of retirement plan holding their assets

QCDs have been available exclusively from IRAs since 2006, when the Pension Protection Act first created the mechanism for tax-free charitable transfers from retirement accounts. The annual QCD limit for 2026 is $111,000 per individual, meaning a married couple filing jointly could transfer up to $222,000 in a single year, provided both spouses are 70½ or older and each makes the transfer from their own eligible account.

How the IRA rollover requirement creates barriers for 401(k) holders

Under existing rules, retirees who hold most of their savings in employer-sponsored plans must follow a multi-step process to access the tax benefits of qualified charitable distributions. They must first initiate a rollover from their 401(k) to an IRA, which can trigger account-closing fees, outbound transfer charges, and custodian fees at the receiving institution.

The rollover requirement also creates a timing problem for retirees who want their donations processed before the December 31 deadline for QCDs to count toward a given tax year, Fidelity noted in its guidance on qualified charitable distributions.

When retirees take a distribution from their 401(k) before donating the funds to charity, the mandatory 20% federal tax withholding the IRS requires on eligible rollover distributions paid directly to the participant can reduce the total value of the gift and add layers of paperwork during tax filing season.

IRA rollover rules create costly delays and tax complications for retirees using 401(k) savings for charitable distributions.

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Qualified charitable distributions offer retirees meaningful tax advantages over cash donations

For retirees aged 73 and older who must take required minimum distributions from their retirement accounts each year, QCDs provide a powerful planning tool because the donated amount counts toward satisfying the annual RMD while remaining excluded from taxable income.

That exclusion matters because higher adjusted gross income can push retirees into higher Medicare premium brackets through income-related monthly adjustment amounts (IRMAAs), which increase costs for both Part B outpatient care and Part D prescription drug coverage.

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Richard Fox, founder of the Law Offices of Richard L. Fox in Gladwyne, Pennsylvania, and a tax attorney who specializes in philanthropic planning, told CNBC that "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 added that large employer plans increasingly offer institutional pricing, sophisticated investment options, and retirement-income features that compare favorably to retail IRAs, meaning extending QCD eligibility to those plans would remove a barrier that currently forces some retirees to roll funds into an IRA solely to make tax-efficient charitable gifts.

Charitable distribution giving has surged in recent years across the nonprofit sector

The demand for tax-efficient charitable giving tools has grown sharply, and QCDs have emerged as one of the fastest-expanding segments of philanthropy.

Data published by FreeWill found that QCD giving grew 56% in 2024 and an additional 47% in 2025, with 46% of surveyed organizations expecting donors to rely even more heavily on tax-efficient charitable vehicles in the coming year.

The surge in QCD activity aligns with broader changes in the tax landscape that have reduced incentives for traditional cash donations. The One Big Beautiful Bill Act expanded and made permanent the higher standard deduction, which means fewer taxpayers itemize their returns.

While the law also created a new above-the-line charitable deduction of up to $1,000 for single filers and $2,000 for joint filers beginning in 2026, the deduction is capped well below the amounts many retirees donate, reinforcing the appeal of QCDs as a more powerful tax-efficient giving tool.

Key provisions of the Charity Parity Act

The bill would extend qualified charitable distributions to 401(k), 403(b), and 457(b) employer-sponsored retirement plans, eliminating the IRA-only restriction in place since 2006.
Retirees aged 70½ and older would be able to transfer up to $111,000 per individual directly from their workplace plans to eligible 501(c)(3) organizations without counting the amount as taxable income.
The legislation would eliminate rollover-related fees, administrative complexity, and processing delays that currently discourage charitable giving from employer-sponsored accounts, according to supporters of the bill.
A companion bipartisan bill is also under consideration that would allow IRA owners to direct QCDs to donor-advised funds, which are currently excluded from QCD eligibility under federal law, CNBC reported.

Major nonprofits rally behind the bill as it enters committee review

The Charity Parity Act has drawn endorsements from a broad coalition of nonprofit organizations, including the American Heart Association, United Way Worldwide, the Salvation Army, the National Council of Nonprofits, Mental Health America, and the American Cancer Society Cancer Action Network,according to the congressional announcement.

The House bill has been referred to the Ways and Means Committee, where both Representatives Kelly and Beyer serve, while the Senate version was sent to the Finance Committee for further consideration.

Brian Graff, CEO of the American Retirement Association, said the bill builds on the success of SECURE 2.0 by ensuring retirement savers receive equal treatment regardless of where they hold their assets, while making it easier for Americans to support the organizations and communities they care about.

What the Charity Parity Act could mean for retirees with employer plans

The bill could become part of a broader SECURE 3.0 legislative package that Congress has been assembling to address remaining gaps in retirement policy, according to discussions at the 2026 NAPA Summit in April.

For retirees who have kept significant balances in their employer-sponsored plans rather than rolling them into IRAs, the Charity Parity Act would unlock a charitable giving strategy that has been available to IRA holders for two decades.

If this legislation becomes law, the practical impact would be straightforward for millions of older Americans who hold 401(k) balances and want to support charities while managing their tax obligations. The bill remains in committee, and its path through Congress will depend on whether lawmakers prioritize retirement reform in the current legislative session.

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This story was originally published May 20, 2026 at 7:07 PM.