A major worry regarding the Tax Cuts and Jobs Act, now being reconciled in House and Senate conference committees and expected to be finalized and passed the week before Christmas, is the language regarding pass-through entities and how that affects small-business retirement plans.

A just-released analysis by the American Retirement Association found that more than 90% of businesses are organized as pass-through entities (partnerships, S corps and small-business limited liability corporations), and more than 320,000 of these entities sponsor a retirement plan for their work force.

The current tax proposals “would reduce the tax rate on business income of these businesses, but would at the same time mean that many of those small-business owners would be penalized financially for making retirement plan contributions, and for establishing a workplace retirement plan for their workers,” according to ARA.

Brian Graff, CEO of ARA, said in a statement that while ARA supports reducing taxes on pass-through businesses, “an unintended consequence of the pass-through proposals under consideration is that they undermine the incentives for these small-business owners to sponsor a retirement plan for their workers.”

The impact on small businesses, Graff continued, “is a particular concern since those who work for small businesses are significantly less likely to have access to a retirement plan at work than those who work for larger employers.”

— Check out SIFMA: Economists See Little Impact From Tax Cuts in 2018 on ThinkAdvisor.