Senate Finance Committee Advances Tax Bill: No Rothification, No Repeal of Exemption from 10% Penalty
by Susan J. White, NAGDCA Legislative Counsel and Paul V. Beddoe, NAGDCA Director of Government Affairs
Just before midnight on November 16, the U.S. Senate Committee on Finance voted 14 to 12 to report its version of the Tax Cuts and Jobs Act to the full Senate for consideration.
The bill does not change the pre-tax contributions to defined contribution retirement plans–so-called Rothification–or other potential provisions which NAGDCA had argued were the most harmful to government defined contribution plans and participants. An earlier version of the bill had language which would impose the ten percent penalty for early withdrawals on governmental 457(b) plans, but Sen. Rob Portman (R-Ohio) was able to get that provision struck from the final version of the bill. NAGDCA President Keith Overly, Executive Director of Ohio Deferred Comp, worked closely with Sen. Portman’s office to preserve this important feature of 457(b) plans.
The bill does include provisions which would repeal the special rules allowing additional elective deferrals and catch-up contributions under section 403(b) plans and governmental section 457(b) plans. Thus, the same limits apply to elective deferrals and catch-up contributions under section 401(k) plans, section 403(b) plans and governmental section 457(b) plans. In a brief exchange late Thursday night, Sen. Portman and Sen. Ben Cardin (D-Md.), indicated a bi-partisan interest in preserving the catch-up provisions. NAGDCA will continue working to protect important features of government defined contribution plans as the bill moves forward in the legislative process.
The full Senate will begin considering the bill when it returns from its weeklong Thanksgiving break.
We will continue to work with Congress and to keep you updated. NAGDCA encourages its members to write to their Senators and Representatives to convey our concerns.
To download a template letter to members of Congress, click here.
For a description of the chairman’s modified version of the bill, click here.
For a description of the chairman’s version of the bill, click here.