Some Republican lawmakers had floated a proposal of drastically reducing the annual limit on pre-tax contributions to a defined contribution plan. The QPA November newsletter celebrates that the House tax reform bill does not incorporate that proposal. The House bill includes some changes to loans and hardships, but does not touch the annual contribution limits.
The Senate bill also does not include any reductions to the most frequently referenced annual contribution limit. In 2017, section 402(g) of the Tax Code limited deferrals to $18,000. In 2018, that limit will increase to $18,500. Thankfully, the Senate bill does not incorporate the previously floated “Rothification” proposal, which would continue to allow Roth contributions at that level, yet slash the pre-tax limit.
But the Senate bill would impact “catch-up contributions”. Currently, the Tax Code would allow a participant to contribute up to an additional $6,000 if he or she were at least 50 within the year the contribution is made. The Senate bill would remove that capability for people making more than $500,000. Standing alone, that’s not a terribly scary change. Those individuals likely need the additional tax-advantaged savings opportunity less than others.
Some are concerned, however, that this presents a slippery slope. They are worried that the income threshold could lead to further reductions in the income threshold – perhaps to $250,000 or as low as $125,000. The Senate bill also would make changes to special catch-up rules for 403(b) and governmental 457 plans. Expect ongoing dialogue, as the two houses attempt the unenviable task of reducing personal and corporate income tax rates without cutting the programs that require the tax revenue in order to continue.
Matthew loves to write. He also loves to think, though he’s probably a better writer than a thinker. He does not like to be on camera or in videos. This blog will allow him to write, challenge his ability to think, and, from time to time, test him with video blog entries.
He has a unique blend of legal and practical experience that helps us to serve our clients well. On the one hand, he has more than 12 years of private legal practice experience focusing exclusively on employee benefits, including time as a partner in an employee benefits boutique where he has represented clients in front of the DOL and IRS. On the other hand, he holds his FINRA Series 7 and 66 registrations and serves as the Director of ERISA Services for Qualified Plan Advisors.
Matthew likes to stay active. He provides fiduciary training, Investment Policy Statement design, and vendor oversight to our clients. He is an active member of the Employee Benefits Committee of the American Bar Association Tax Section, serving as Chair of the Defined Contribution Plans Subcommittee. He also has been appointed to the IRS TE/GE Gulf States Council and is a frequent speaker on regulatory developments, fiduciary responsibilities, and retirement readiness.
Most importantly, he stays active with his family. His wife, Laura, is the founder of REbeL, Inc., a not-for-profit organization. His three young boys are mixed up in far too many sports, and they enjoy traveling, watching college football, running with Dad, and rooting for the Huskers.
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