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.
Both organizations have worked together as part of the Save our Savings Coalition, which is an alliance of educational and corporate businesses and trade groups dedicated to protecting Americans’ retirement savings.
Now they have joined together, with the PSCA becoming a membership division of the ARA, joining four other retirement organizations: the National Association of Plan Advisors), the American Society of Pension Professionals & Actuaries, the ASPPA College of Pension Actuaries and the National Tax-Deferred Savings Association.
“With the addition of this key constituency, the American Retirement Association truly becomes the voice of the nation’s private retirement system,” said Brian Graff, CEO of the association in a statement.
“Joining forces significantly improves our ability to elevate important retirement industry issues and better serve our members,” said Raskin in the same press release.
In a conference call with reporters discussing the new joint relationship between the two organizations, both Graff and Raskin said there was still more work to be done on the tax cut bill. The expansion of pass-through entities to all types of businesses remains in the Senate bill and could discourage formation of small-business retirement plans, said Graff.
The PCSCA represents the corporate sponsors of employee benefit plans and as a little more than 700 corporate, nonprofit and trade association members representing more than six million plan participants. The ARA has over 22,000 individual members and now five retirement industry associations. Both organizations will remain independent with their own boards of directors.