Retirement savings is a centerpiece of House Republicans’ bid to make last year’s tax cuts permanent with changes that would benefit new parents, older retirees, and IRA contributors with less than $50,000 in their nest egg.
The Family Savings Act (H.R. 6757) portion of the GOP’s latest tax package, released Sept. 10, includes 17 retirement-related provisions, ranging from the creation of tax-preferred universal savings accounts to allowing Roth individual retirement account holders to squirrel away money forever.
The broader Tax Reform 2.0 bundle’s future in the closely divided Senate remains unclear. But here are a half-dozen proposals in H.R. 6757 to keep an eye on:
- Multiple employer plans: allowing small business owners to pool their resources in order to offer 401(k) plans. A similar idea was included in an executive order President
signed on Aug. 31.
- Repeal of maximum age for traditional IRA contributions: Participants in tax-free Roth accounts would be able to keep contributing money until death.
- Portability of lifetime income investments: This would preserve the tax-free treatment of payments from qualified investments and annuities.
- Exemption from required minimum distribution rules: This would excuse account holders with less than $50,000 saved in tax-deferred retirement accounts from taking mandatory withdrawals each year. That cap also would be indexed for inflation. Trump’s executive order also directed Treasury officials to consider updating the RMD rules to reflect longer life expectancy rates.
- Universal Savings Accounts: The new savings option would allow individuals to contribute or roll over $2,500 per year in after-tax income. Money could be withdrawn tax-free for any purpose.
- Qualified birth/adoption benefits: Parents of a newborn or those adopting a child would be able to withdraw up to $7,500 from retirement accounts penalty-free within one year of the new arrival. Account holders can also repay any distributions.
House Ways and Means members are tentatively scheduled to mark up the bill on Sept. 13.
To read more from Benefits & Executive Compensation News please