When the Senate Finance Committee begins the markup of its tax cut bill on Thursday afternoon it will not include several provisions that would have limited the tax-preferred treatment of retirement plan contributions.
The full House passed its own version of the bill, the Tax Cuts and Jobs Act, on Thursday.
The latest version of the Senate committee’s tax cut bill does not require that catch-up contributions to 401(k) plans — available to those 50 and older — be limited to after-tax Roth contributions, an amendment originally added by Senate Finance Chairman Orin Hatch (R-Utah), according to Brian Graff, CEO of the American Retirement Association (ARA).
Nor does it eliminate nonqualified deferred compensation plans, which was also included in the initial Senate Finance tax cut bill. Such plans allow executives who have already maxed out on their 401(k) contributions — which will be capped at $18,500 in 2018 — to defer income into the future, earning tax-deferred returns in the meantime, in order to maximize their retirement savings.
Graff and Ken Raskin, chairman of the Plan Sponsor Council of America (PSCA), take partial credit for these changes in the current Senate tax cut bill.