You’ve surely heard that tax reform is in the wings. But did you know that some in Congress are kicking around the idea of drastically changing 401(k) contribution limits in order to help pay for it?
An idea floated by House Republicans to help pay for President Trump’s proposed tax cuts is to limit – by a lot – the amount of pre-tax money that workers can annually contribute to their 401(k) plans. Under present rules, those younger than age 50 can contribute up to $18,000 per year to the plan, while workers 50 and older can set aside as much as $24,000. The proposed limit is just a fraction of those amounts – a measly $2,400.
As reported by the Chicago Tribune, Donald Trump, for his part, announced that no such changes would be forthcoming under his watch, tweeting, “There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!”
However, despite that optimistic declaration, Republicans in the House of Representatives are quietly forging ahead in finding ways to pay for tax cuts…and leaving all options on the table, including the possibility of a significant restructuring of the 401(k) plan. When asked about whether such an ostensibly sacred cow might actually be sacrificed, Ways and Means Chair Rep. Kevin Brady replied, “I don’t want to get ahead of the committee. That will all be part of the tax reform bill.”
And when he was additionally asked if the president’s pro-401(k) tweet means the proposed cut to the annual contribution limit was now off the table, Brady flatly responded, “No.”
By Robert G. Yetman, Jr. Editor At Large