But at least those individuals know they cannot contribute & can plan accordingly.
This is not true. The IRS requires that testing be conducted annually to ensure that highly compensated employees are not benefiting substantially more than non-highly compensated employees. Plans that fail the tests must make remediation. Sure, they could might make additional contributions only for the lowest-paid employees (yes, that's not only legal, it is specified explicitly as one of the two remedies), but I suspect that it more likely that they'll take the other approach, "Distribution of the Excess", the plan returns the excess contributions to the highly compensated employees.
Ours is not a safe harbor plan. I don't have access to the data, of course, but I don't think our plan is far away from failing the ADP testing. For various reasons, I believe there is a significant probability that I will be told that I have to take an involuntary distribution, this year. But I don't know, and won't know until the end of the year, whether the contributions I've made this year will "stick".
Anyway this is just a budget proposal.
That's an important point: Saying that the proposal is bad because it doesn't have this provision or this specific detail outlined is silly - it just means that it needs to be amended or clarified. Big difference. I want to see the proposal have indexing to CPI specified, and I want its impact to be limited to limiting current-year contributions in any year after a year where your combined balances exceed the threshold. I think those would be nice amendments.
I did a quick check for me and DW... to get a joint annuity for both of us for $205K would cost us north of $4.8 mill...
The premise you outlined would be a reason to suggest that the number should be $4.8M instead of $3M or $3.2M. I'm not even sure about that, though, because you priced a joint annuity. The limit is expressed as an individual limit, and so it naturally would be expressed in terms of an individual annuity, regardless of whether or not that fit any one person's own personal preferences.
IRA's were implemented as a way to encourage people who were not saving for retirement to do so, by giving them a tax incentive (deferral) on that savings. Contribution caps and MRD's were put in place to discourage people from trying to use these accounts to accumulate significant wealth without first paying income tax on it and pass that untaxed wealth on to heirs. Sounds to me like the limits being proposed now are just another way the government is trying to reinforce the original purpose of IRA's...to provide retirement income for those who otherwise might not have any.
This is a very elegant way of expressing it.
Why should one be punished because he/she chose better investments than others?
I don't see anything about anyone being punished. The proposal is about limiting to whom tax advantage - an incentive - is offered. Not getting an incentive (for something you're clearly aim to do anyway) isn't punishment.