The Senate Tax Bill and Last-Minute Controversy Over - 403(b)?
On December 1st, I was eagerly awaiting the vote on the Senate Tax Reform bill, which, as indicated in our recent article on the subject, contained provisions that would have eliminated most of the special contribution limits that apply to 403(b) plans. My wait ended up being quite long, as the bill was not passed until the wee hours of Saturday morning. While waiting, I resigned myself to the fact that the 403(b) provisions would likely remain in the bill, since there were so many other significant items for senators to debate as they undertook the process of finalizing the bill in an extremely compressed timeframe.
But a funny thing happened on the way to the bill’s passage. One of the senators who objected to a number of bill provisions, Susan Collins of Maine, sent out a captivating Tweet:
Up to this point, I was unaware that anyone was working to remove the 403(b) provisions from the Senate bill; and Susan Collins is not only a Senator, but also one of the critical swing votes that would mean the difference between the bill’s passage or failure! Now, Senator Collins did submit a number of additional amendments to the bill, so 403(b)s were not her only issue. But for 403(b)s to even be on her radar, much less one of her key issues that would ensure a “Yes” vote, was simply fascinating to me!
There is no doubt that the efforts of the plan sponsor community and those who lobby for them were a factor in Senator Collins’ championing of the 403(b) cause in the last-minute wrangling of the bill. However, with many groups lobbying for various causes, it was amazing that Senator Collins chose to include 403(b) (and 457(b)) plan sponsors as one of the many constituent groups for which she openly advocated at this critical juncture in the tax reform process.
Despite the favorable Tweet, however, I was eager to confirm that ALL of the contribution limit provisions that affected 403(b) plans were removed from the final bill, not just the catch-up provisions that Senator Collins referenced. This proved to be an arduous process, as hours passed on Friday afternoon with no bill released to the public, even though a vote was imminent. In fact, some senators complained that they, themselves, had yet to receive the bill. Finally, a bill was released to the senators in the evening, but with handwritten changes to some provisions which, in some cases, were barely legible!
At any rate, the bill was passed after midnight, and as of Monday morning I still could not get my hands on a searchable version of the bill. A number of reports surfaced indicating that, although the provisions eliminating 403(b) and 457(b) catch-up elections were indeed eliminated, the other contribution limitations, including a rather onerous one that would have combined the 403(b) and governmental 457(b) plan deferral limits, had survived. Given Senator Collins’ Tweet, this made little sense, but I had no way to disprove the articles without reading the entire final bill — all 479 pages of it!
So read it I did, and, happily, the articles were incorrect; Senator Collins had succeeded in removing all 403(b) and 457(b) contribution limit provisions from the final bill. Now, thanks to the efforts of one Senator, neither the Senate nor House bills contain any provisions that negatively effect 403(b) or other types of retirement plans to any significant degree. Will the reconciliation of the two bills into one that will eventually be signed into law contain any new retirement plan surprises? Stay tuned!
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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