Trump likes 401(k) — ‘it stays!’ in tax plan
GOP said to consider lower cap in account rules
President Donald Trump on Monday vowed there would be “no change” to rules for 401(k) plans, seeking to douse speculation that the Republican tax overhaul bill being drafted by Congress would include new limits on retirement savings.
“This has always been a great and popular middle class tax break that works, and it stays!” Trump said on Twitter. “There will be NO change to your 401(k).”
He personally implored House GOP members on a conference call to swiftly adopt the budget that was passed last week by the Senate, with the hope of clearing the way for what he described as historic tax cuts.
Trump told the lawmakers they were on the verge of doing something historic, according to one Republican official, who, like others, spoke on condition of anonymity because they were not authorized to discuss publicly what was intended as a private update for members.
Another GOP aide familiar with the conversation said Trump told the members again and again that the party would pay a steep price in next year’s midterm elections if it failed to pass his plan. The Trump proposal would slash the corporate tax rate to 20 percent and double the standard deduction used by most Americans. The president also said multiple times that his plan was the right thing to do for the country, this person said.
The outlines of the tax overhaul released by the White House and Republican leaders last month said that “[t] ax reform will aim to maintain or raise retirement plan participation of workers and the resources available for retirement.”
Lawmakers are drafting legislation based on the framework, which is centered around a large cut to the corporate tax rate, other breaks that would benefit the wealthy and mostly unspecified promises of helping reduce taxes for the middle class.
But there have been reports that Republicans in Congress are weighing new limits on the upfront tax break for 401(k) savings as a way of generating additional federal revenue to offset money lost by the rate cuts and other proposed changes.
The New York Times reported Friday that House Republicans were considering placing a cap of as low as $2,400 on the annual amount that workers can put into their 401(k) accounts to defer tax payments until they tap the savings in retirement.
The current limit is $18,000, and it rises to $24,000 a year for people over 50 years old to encourage them to save more for retirement.
As of June 30, 401(k) plans held about $5.1 trillion in assets, about 19 percent of all U.S. retirement assets, according to the Investment Company Institute, a fund trade group.
About 54 million Americans were active participants in 401(k) plans in 2015, the latest figures available, the group said.
A Federal Reserve survey found that 401(k)s were the most popular way to save for retirement, with about 50 percent saying they had such a plan. But about 28 percent of U.S. adults who are not retired said they had no retirement savings or pension, according to the Fed survey.
Politicians and experts have worried that many Americans are not saving for retirement, a problem exacerbated by the decline of traditional workplace pension plans.
Senate Finance Committee Chairman Orrin Hatch R-Utah, who will play a key role in consideration of tax legislation, said on Monday that his panel “will not change the 401(k) retirement savings system in a manner that does not achieve the goals outlined in the unified framework; namely, to maintain or raise retirement plan participation for workers and the resources available for retirement.”
Brian Graff, chief executive of the American Retirement Association, a nonprofit group that represents pension professionals, plan advisers and actuaries, said he welcomed Trump’s promise that the tax overhaul would not include changes to 401(k) rules but acknowledged placing that new limits on the plans are a tempting target for lawmakers.
“They want to do tax reform and they’re going to be looking for revenue and we have to continue to remain vigilant,” Graff said. The group’s annual meeting is this week in Washington, and 500 of its members will be on Capitol Hill on Tuesday urging lawmakers not to put new limits on 401(k) plans.
“They should not be using the 401(k) as a piggy bank for corporate tax cuts,” Graff said.
In April, the American Retirement Association joined with other groups and businesses, including AARP, the Financial Services Roundtable and pension fund TIAA, to form the Save Our Savings Coalition to prevent changes to 401(k) rules in the tax overhaul.