Pension Provisions of New Republican Tax Plan

Bob Woodward’s Fear is now available with its narrative of a dysfunctional executive surrounded by a combination of traitors and dedicated public servants looking to keep the country on the right path notwithstanding the distractions. Among the latter group are Republicans on the tax-writing House Ways and Means Committee which just released a tax plan that would:

I work with retirement plans so I can speak to some of the proposals in the second bullet point which, for the most part, make sense:

SEC. 102. RULES RELATING TO ELECTION OF SAFE HARBOR 401(k) STATUS: This looks like they are going to allow an election of safe-harbor status if the election is made by December 1 of the plan year (when you can anticipate if the ADP test is going to fail) and the nondicscretionary contribution is 4% of pay.

SEC. 104. REPEAL OF MAXIMUM AGE FOR TRADITIONAL IRA: Right now you can’t make IRA contributions after age 70-1/2 though you can continue to contribute to a qualified plan, a situation that props up the market for qualified plans but is discriminatory against those who can’t afford (or don’t know) to set up a solo-k.

SEC. 109. EXEMPTION FROM REQUIRED MINIMUM DISTRIBUTION RULES FOR INDIVIDUALS WITH CERTAIN ACCOUNT BALANCES: Exemption from having to take out money when you attain age 70-1/2 for those with balances under $50,000 with a requirement that the Plan Administrator report anyone who turns age 69 to the IRS.

SEC. 201. PLAN ADOPTED BY FILING DUE DATE FOR YEAR MAY BE TREATED AS IN EFFECT AS OF CLOSE OF YEAR: Right now anyone who wants to set up a qualified plan needs to execute the paperwork within that first plan year. This change would give you until the due date of the tax return (with extension) for that year.

SEC. 202. MODIFICATION OF NONDISCRIMINATION RULES TO PROTECT OLDER, LONGER SERVICE PARTICIPANTS: Changes to 401(a)(4) rules that should make testing easier to pass, especially for closed plans.

SEC. 203. STUDY OF APPROPRIATE PBGC PREMIUMS: Hallelujah! It is only a study but any honest observer looking at the draconian premiums that single-employer plans have to pay now is bound to recommend a fairer premium structure that may even keep some defined benefit plans from having termination as their default option.

SEC. 530U. UNIVERSAL SAVINGS ACCOUNTS: Looks like a mini-IRA with $2,500 annual limit to start.

SEC. 303. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR INDIVIDUALS IN CASE OF BIRTH OF CHILD OR ADOPTION: Presumably this would eliminate the 10% excise tax on distributions (up to $7,500) made prior to age 59-1/2 for these expenses.

6 responses to this post.

  1. Posted by skip3house on September 11, 2018 at 10:22 am

    Simply let system develop as a tree. Trunk/limb/branch/twig and every leaf twists to find maximum ‘sunshine’. How can needs of every individual be met/measured/ensured?


  2. Posted by Anonymous on September 11, 2018 at 5:23 pm

    Key takeaway is ALL politicians make empty promises for cold hard votes. Their party doesn’t matter, it’s who’s attending the polls!


  3. Posted by Anonymous on September 11, 2018 at 5:25 pm

    And let’s not forget those who passed on 9/11 and thank someone this POTUS wasn’t in office at the time because…..


  4. Posted by geo8rge on September 13, 2018 at 10:16 am

    Possibly interesting primary in Rhode Island. Pension reformer incumbent Gov Raimondo 54% vs 2 other challengers who promised roll backs (I think) together got 45%. There were about 100,000 votes cast in the Democratic Primary, compared with 460,000 for Trump v Hillary. Not so good that a sitting female governor only did 55% in a Democratic Primary.

    What does the R candidate have to say about RI pensions?

    “We live in fear a politician will reduce our pensions,″ the retiree (who asked to remain anonymous)

    No worry, said Fung, each time he happened upon a retired public employee. His promise: a more “sympathetic” ear than he said the current governor, Gina Raimondo,

    “I am certainly not in the camp of Matt Brown, undoing all those reforms, because I think that is reckless,″ Fung later said of the former Rhode Island secretary of state who is challenging Raimondo in the Democratic primary. “But I am very, very sympathetic,″ said Fung, promising to look, at the very least, at providing more frequent pension increases.


  5. […] legislation passed [in] his first year”: tax reform. Another round is coming that, as it relates to retirement plans, seems sensible but the backstory of those 2017 reforms reflects the chaos of Trump’s first […]


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