What’s Cooking in Congress for Retirement Plans?
On my new Twitter Feed, I post the best retirement content I see every day, so that you don’t have to read every article that arrives in your inbox. One of my recent posts happened to come from my colleague, Jeff Snyder, who was fortunate enough to sit down with Preston Rutledge, Tax and Benefits Counsel at the Senate Finance Committee. For those of you who are concerned about tax reform and other possible future legislation, Jeff’s interview with Preston is an absolute must-see, in my opinion.
Below are some of the key points from the interview:
- While tax reform is a current priority of the Senate, the lowering of retirement plan contribution limits does not appear to be a top-shelf item — Many commentators have indicated that an obvious target for tax reform would be the 402(g) and other retirement plan contribution limits. Thanks to previous tax law changes, these limits allow individuals to shelter significant amounts from taxation for retirement purposes, particularly for plan combinations where the limits are independent, such as a 403(b)/457(b) combo. However, Preston indicates that there is reluctance in the Senate Finance Committee to reduce these, given the long-standing commitment to those limits, dating back to the 2000s. Keep in mind that Preston is not expressing an official policy position, but rather sharing his own insights. However, it is better to hear that there is reluctance to lower limits, rather than the opposite opinion! And, if it turns out that lowering limits is not a priority (although Preston emphasized that everything is on the table when it comes to tax reform), it is hard to imagine that the rumors in the House regarding a proposal to turn the current pre-tax savings system into a Roth system would gain traction in the Senate, since it would affect far more people than a reduction in contribution limits.
- There is still hope that the Open-MEP provision can be attached to tax reform or some “must pass” legislation in order to pass — The Open MEP, which would allow unrelated employers, that could otherwise not establish retirement plans on their own, to band together to participate in a single, multiple-employer plan (or MEP). The Open-MEP provision had bipartisan support as part of a retirement savings bill (the Retirement Enhancement and Savings Act passed 26-0 in the Senate Finance Committee), but was unable to be attached to the budget bill last year. Preston indicates that there will be similar opportunities to get the bill passed this year (tax reform being one such opportunity), but also stated that the atmosphere at present is less bipartisan, which can make bills like this one more difficult to pass. Preston did not comment on state-run auto-IRAs, a similar mechanism to provide coverage to workers not covered by a traditional retirement plan, but it should be noted that President Trump signed into law a bill to roll back the DOL safe harbor for city and county-sponsored auto-IRAs (though not state-run auto-IRAs, as a House bill has yet to be voted upon in the Senate).
I urge you to watch the entire interview; it provided some fascinating insight not only on the current legislative landscape, but also on how Congress works as well.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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