Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, added the provision on Feb. 7 during markup of the bill by his committee, but after pushback he promised to have the provision removed.

During the markup of the bill, Baucus said that "IRAs are intended for retirement," adding that IRAs are being "used by some taxpayers to give tax-free benefits" to future generations. The taxes from the stretch IRAs provision was to be used to help pay for the highway bill, and would raise $4.6 billion over 10 years.

As it stands now, the provision was adopted by Baucus' committee and remains intact in the highway bill, which awaits action by the full Senate. Once taken up by the Senate, industry officials believe that the IRA provision will be replaced with one that raises the funds by changing the way assets are valued in defined benefit plans.

Judy Miller, chief of actuarial issues at the ASPPA, says that the new provision would likely "reduce the current required contribution to defined benefit plans; when you do that there are fewer deductions taken so it raises money."

But given that the IRA provision has yet to be taken out, the Financial Services Institute is mobilizing its members to have it removed.

Chris Paulitz, spokesperson for FSI, says that FSI "won't rest" until it's removed. "We're keeping the pressure on from our members to try and ensure it eventually is indeed stripped out."

FSI said in a Feb. 15 letter to its members that "while we expect the provision to be removed from the highway bill, it is important that we send the Senate the message that taxes on inherited IRAs should not be used to pay for other governmental spending."

In a statement released Feb. 23, FSI president and CEO Dale Brown said more than 2,000 of his organization's members have weighed in on the issue with their representatives.

"With the provision requiring beneficiaries to pay taxes over five years, instead of spreading them over their lifetime, this would have greatly deterred saving at a time in our nation's history when saving is already strained to say the least," Brown said. "We applaud Leader Reid for taking this initiative and protecting saving in America."  

IRA guru Ed Slott said Tuesday that Congress "sees gold in IRAs," and that the provision on stretch IRAs being inserted into the highway bill "is an indication of where Congress intends to find money to pay for the future."

Slott said that advisors must "look at the money that their clients may intend to leave over [to heirs] and leverage that now, whether through life insurance or a charitable trust or changing beneficiaries" because Congress believes that IRA money "was never meant to be used as an estate planning vehicle to pass on to beneficiaries."

Robert Miller, president of the National Association of Insurance and Financial Advisors, said that NAIFA "is concerned that changing the tax rules on inherited IRAs and other retirement products would place an added burden on middle-income Americans at a time when numerous studies show that Americans are financially under-prepared for retirement."

At the very least, he said, "legislation changing the rules should receive more study rather than being rushed through as part of a highway bill. NAIFA is pleased that the Senate leadership has proposed to remove changes to inherited IRAs from the current bill."