The U.S. House of Representatives passed the “Tax Cut and Jobs Act” (H.R. 1) last Thursday without, unsurprisingly, any Democratic support. The retirement plan provisions in the bill haven’t changed. No eleventh-hour revenue-grabbing effort to convert all 401(k) plan contributions to Roth contributions or to place substantial limits on pre-tax plan contributions. But there are still opportunities to do so if the need for additional revenue offsets arises.
There was additional action on Thursday night – the Senate Finance Committee approved its version of the tax reform bill. The Committee removed two of the retirement savings provisions from the earlier version of the Senate bill: the application of the 10% early withdrawal tax to governmental section 457(b) plans and the elimination of catch-up contributions for high-wage employees, which were described in our last post. But the big headline out of the Senate is that the bill now includes the repeal of the Affordable Care Act’s individual coverage mandate. The repeal gives tax writers an additional $338 billion in savings over a decade, which helps offset the bill’s tax cuts and keeps the bill compliant with the Byrd Rule. It also, of course, creates additional controversy.
The bill, still in discussion form, likely will hit the Senate floor shortly after the Thanksgiving break. Presumably, there will be legislative language before then – but it’s not clear how long before then. There is lots of opportunity for legislative mischief in the translation process. There also is the possibility that the individual mandate repeal gets pulled – in which case, a new revenue source will be needed and retirement savings plans could be in the hot seat again.