Author Topic: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill  (Read 6973 times)

anadyne

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #50 on: November 25, 2017, 05:05:54 AM »
Here's the text itself. Retirement info starts on page 177. https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf


For us, the hits just keep on coming; first the taxing of tuition for graduate assistants and fellows and then the proposed 457 changes (withdrawal tax and halving the contribution limits). I suppose at least it's a learning experience - never plan based on current law.

Ok, first of all, great job for finding this and figuring out where the retirement info starts.  Secondly, thanks for posting it. 

However, I read pages 177-181, but I still don't get it.  If any of you are able to clarify the proposed changes for me, I'd really appreciate it. 

Here's my current situation:
-  My wife and I both have access both a 403 and a 457. 
-  My wife and I max both of them out, so we shelter 72k/year through them. 

What will and won't I be able to do through these accounts if the proposed bill actually passes?

This would absolutely suck for me. I'm single and I've just started maxing out my 403b and moving into my 457. I don't know why some employees have this double tax advantage, nor do I know why some employees get a free gym membership or access to a corporate car or whatever. I was just very happy to have the perk (government workers don't have that many) and worked hard to maximize it, same as anyone else. And it's hard on a gov't salary for a single person to sock away $36K of income and I actively sweat over my spreadsheets planning my next tax year and how to creep my savings rate up one or two percent to ensure my future. So while it seems 'unfair' that some career paths come with a different set of perks, to me it was a matter of choosing whether that perk was more important to you than a high salary, and choosing your employer accordingly. Yeah it would be NICE to have a high paying job or self employment plus double retirement accounts, but those career choices come with a different set of perks. It sucks to me to plan hard for career and savings based on a set of financial circumstances that can disappear tomorrow.

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #51 on: November 29, 2017, 05:44:01 PM »
Here's the text itself. Retirement info starts on page 177. https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf


For us, the hits just keep on coming; first the taxing of tuition for graduate assistants and fellows and then the proposed 457 changes (withdrawal tax and halving the contribution limits). I suppose at least it's a learning experience - never plan based on current law.

Ok, first of all, great job for finding this and figuring out where the retirement info starts.  Secondly, thanks for posting it. 

However, I read pages 177-181, but I still don't get it.  If any of you are able to clarify the proposed changes for me, I'd really appreciate it. 

Here's my current situation:
-  My wife and I both have access both a 403 and a 457. 
-  My wife and I max both of them out, so we shelter 72k/year through them. 

What will and won't I be able to do through these accounts if the proposed bill actually passes?

This would absolutely suck for me. I'm single and I've just started maxing out my 403b and moving into my 457. I don't know why some employees have this double tax advantage, nor do I know why some employees get a free gym membership or access to a corporate car or whatever. I was just very happy to have the perk (government workers don't have that many) and worked hard to maximize it, same as anyone else. And it's hard on a gov't salary for a single person to sock away $36K of income and I actively sweat over my spreadsheets planning my next tax year and how to creep my savings rate up one or two percent to ensure my future. So while it seems 'unfair' that some career paths come with a different set of perks, to me it was a matter of choosing whether that perk was more important to you than a high salary, and choosing your employer accordingly. Yeah it would be NICE to have a high paying job or self employment plus double retirement accounts, but those career choices come with a different set of perks. It sucks to me to plan hard for career and savings based on a set of financial circumstances that can disappear tomorrow.

Yeah, the part that I think is the shadiest is if they don't grandfather in money already contributed to 457's.  I mean, the main reason to shelter in the 457 was because I was told by federal law that I would be able to access it as soon as I retired.  My wife and I now have about 35k in 457s.  Even if I didn't contribute another dime, that would likely be 100k when I'm 48.  That is what we planned to use for our kids college costs. 

It's one thing to say, ok, this is the new rule going forward, but another thing to say, ok, you intentionally put this money here because we explicitly said you could access it, but fuck you, it's already there and now you can't access it until you are 59.5 years old.

DavidAnnArbor

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #52 on: November 29, 2017, 05:46:39 PM »
So I guess the 457 changes are still on the table with the Senate's proposed plan ?

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #53 on: December 01, 2017, 09:33:40 AM »
SeattleCyclone or anyone else who is super tax knowledgeable, here is my current situation

Irrevocable 403b  $38k
457b   $15k

now, my 403b has an upper limit of $54k, so I'm assuming I could just move all my contributions over to it, right? The real ass kicker is my employer only gives matching funds on $$ put into my 457 and it looks like I'll be prevented from doing it entirely if my 403b limit has already surpassed it (and I am prevented from ever changing the election amount unless I quit).

Any thoughts on this?
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seattlecyclone

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #54 on: December 01, 2017, 10:29:30 AM »
SeattleCyclone or anyone else who is super tax knowledgeable, here is my current situation

Irrevocable 403b  $38k
457b   $15k

now, my 403b has an upper limit of $54k, so I'm assuming I could just move all my contributions over to it, right? The real ass kicker is my employer only gives matching funds on $$ put into my 457 and it looks like I'll be prevented from doing it entirely if my 403b limit has already surpassed it (and I am prevented from ever changing the election amount unless I quit).

Any thoughts on this?

Where are those $38k and $15k coming from? Your own pre-tax and Roth contributions across both plans would be limited to a total of $18k. That plus employer contributions and after-tax traditional contributions would be limited to a total of $54k. Right now you have $53k going into the two plans, so you would be safe on the overall limit. If at least $35k of that is coming from your employer you might not need to change a thing.
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Gyosho

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #55 on: December 02, 2017, 12:11:55 PM »
Here's the text itself. Retirement info starts on page 177. https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf


For us, the hits just keep on coming; first the taxing of tuition for graduate assistants and fellows and then the proposed 457 changes (withdrawal tax and halving the contribution limits). I suppose at least it's a learning experience - never plan based on current law.

Wow, thanks for pointing this out! The text at the top of page 179 says:

"The proposal applies a single aggregate limit to contributions for an employee in a
governmental section 457(b) plan and elective deferrals for the same employee under a section
401(k) plan or a 403(b) plan of the same employer. Thus, the limit for governmental section
457(b) plans is coordinated with the limit for section 401(k) and 403(b) plans in the same manner
as the limits are coordinated under present law for elective deferrals to section 401(k) and
section 403(b) plans. "

I have been lucky enough to work for an organization that offers both a 403(b) and 457(b) plan. As a Mustachian, I have been loading them to the hilt every year, and celebrated turning 50 by contributing the extra $6000 catch-up contribution to each. If they pass this (I guess they have passed it) then I will retire next year rather than lose the ability to make those contributions. I have been waffling on retiring next year or not - this definitely makes the decision for me.

As long as they don't also get rid of the "Rule of 55" (I am 55 now).


fuzzy math

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #56 on: December 02, 2017, 02:57:21 PM »
SeattleCyclone or anyone else who is super tax knowledgeable, here is my current situation

Irrevocable 403b  $38k
457b   $15k

now, my 403b has an upper limit of $54k, so I'm assuming I could just move all my contributions over to it, right? The real ass kicker is my employer only gives matching funds on $$ put into my 457 and it looks like I'll be prevented from doing it entirely if my 403b limit has already surpassed it (and I am prevented from ever changing the election amount unless I quit).

Any thoughts on this?

Where are those $38k and $15k coming from? Your own pre-tax and Roth contributions across both plans would be limited to a total of $18k. That plus employer contributions and after-tax traditional contributions would be limited to a total of $54k. Right now you have $53k going into the two plans, so you would be safe on the overall limit. If at least $35k of that is coming from your employer you might not need to change a thing.

Technically it's all my money, and my employer puts 3% into my 401a based off what I put into my 457b. That would put me over the limit if they are counting employer contributions towards the $54k. I tried googling a better way of describing it - an irrevocable election, and I saw some sorts of comments that lead me to believe it may be treated as my employer paying it to me instead of me deferring it? My employer also lets me put $$ into the 403b, which makes it seem like I am not the person putting into the irrevocable plan. I can't quite tell
https://benefitslink.com/boards/index.php?/topic/10686-one-time-irrevocable-election/

It really sucks if this does read this way as it will significantly raise the amount of time I have to work. This if my first year with this employer and I had looked forward to being able to utilize this benefit and only work < 10 years.

I think the confusing part is that there's going to be a Jan 31 paycheck coming with this deduction on it and no one is going to know what to do. The paper I signed says I can't change it unless I quit. Wtf.
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aceyou

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #57 on: December 02, 2017, 07:46:07 PM »
Here's the text itself. Retirement info starts on page 177. https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf


For us, the hits just keep on coming; first the taxing of tuition for graduate assistants and fellows and then the proposed 457 changes (withdrawal tax and halving the contribution limits). I suppose at least it's a learning experience - never plan based on current law.

Wow, thanks for pointing this out! The text at the top of page 179 says:

"The proposal applies a single aggregate limit to contributions for an employee in a
governmental section 457(b) plan and elective deferrals for the same employee under a section
401(k) plan or a 403(b) plan of the same employer. Thus, the limit for governmental section
457(b) plans is coordinated with the limit for section 401(k) and 403(b) plans in the same manner
as the limits are coordinated under present law for elective deferrals to section 401(k) and
section 403(b) plans. "

I have been lucky enough to work for an organization that offers both a 403(b) and 457(b) plan. As a Mustachian, I have been loading them to the hilt every year, and celebrated turning 50 by contributing the extra $6000 catch-up contribution to each. If they pass this (I guess they have passed it) then I will retire next year rather than lose the ability to make those contributions. I have been waffling on retiring next year or not - this definitely makes the decision for me.

As long as they don't also get rid of the "Rule of 55" (I am 55 now).

I'm glad you've been able to get the benefit for it for a while. 

I'm 34 and my wife is 33.  This year was the first time maxing for us.  We each filled both for 72k.  We have paired down our expenses tremendously so that we could do this for 2 or 3 more years and jump start our investing career.  Doesn't look like that's going to be able to happen as planned now. 

jean

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #58 on: December 02, 2017, 09:54:31 PM »
This change does not appear in the version that passed the senate (which had lots of changes from the draft text). It is also not in the version that passed the house.

We need to see what passes into law, but for now it looks like this change was dropped.

Here is the one that passed the Senate: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0

anadyne

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #59 on: December 03, 2017, 05:44:15 AM »
I can't understand the legalese language very well, so can someone smarter than me summarize whether 457b + 403b are now sharing the $18,500 annual limit in the new tax bill? If that's the change written about in the above post, apologies (we have a couple of changes in play in this thread, so just making sure).

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #60 on: December 03, 2017, 10:50:22 AM »
I can't understand the legalese language very well, so can someone smarter than me summarize whether 457b + 403b are now sharing the $18,500 annual limit in the new tax bill? If that's the change written about in the above post, apologies (we have a couple of changes in play in this thread, so just making sure).

From what I understand, there will be a single limit for all types of accounts. I do believe the Senate version still allows the 50+ catch up provision.

I'm really hoping it does not go through, as I contribute to both right now.

DavidAnnArbor

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #61 on: December 03, 2017, 03:40:07 PM »
I max out my 401k, and I also put as much in my 457 as I can. I sure hope I can continue to do that. Can't believe we have to sacrifice for these super rich people so that they don't have to pay as much taxes.

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #62 on: December 04, 2017, 01:19:06 PM »
Due to some confusion on my part about whether the 457's will emerge unchanged in the new tax legislation working its way through conference, I've put a hold on my contributions effective 12/31.  My deferred comp administrator is slow to implement contribution changes and I don't want any money to end up in the plan in 2018 if the IRS is now going to group the total contribution limit of our 401/403 with the 457 limit (capping total at $18,500).  If it turns out 457's aren't impacted by the new legislation, there's always time to max out contributions over the duration of the year.

Abe

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #63 on: December 04, 2017, 09:32:56 PM »
As of right now, pending some hand-written scrawl somewhere in this 500-page boondoggle, the Senate version continues to allow 457b contributions independent of 401k contributions.

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #64 on: December 05, 2017, 04:43:33 AM »
It doesn't sound like this is going to attach the private sector version of a 457 for me, commonly known as a rabbi trust.  That would make sense because its technically an asset of the company I work for and they pay taxes on the earnings at the corporate level.
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powskier

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #65 on: December 05, 2017, 11:32:04 PM »
I'm looking forward to market gains after we finally decrease corporate taxes from obscene to excessive.
Those gains are already priced in.

Also please note the market gains during the entire time period when corporate taxes were "excessive".

ixtap

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #66 on: December 06, 2017, 10:13:18 AM »
I'm looking forward to market gains after we finally decrease corporate taxes from obscene to excessive.
Those gains are already priced in.

Also please note the market gains during the entire time period when corporate taxes were "excessive".

The market seems more worried about Mueller than excited about tax reform at the moment.

Babybalrog

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #67 on: December 07, 2017, 09:43:56 AM »
As of right now, pending some hand-written scrawl somewhere in this 500-page boondoggle, the Senate version continues to allow 457b contributions independent of 401k contributions.

According to Planadvisor.com https://www.planadviser.com/tax-bill-passed-senate-backs-off-457b-403b-plan-changes/
The last minute changes to the bill included removing the tampering to 457 plans.
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Gyosho

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #68 on: December 08, 2017, 09:12:21 AM »
Thanks for posting that! It was very helpful.

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #69 on: December 09, 2017, 08:37:41 PM »
As of right now, pending some hand-written scrawl somewhere in this 500-page boondoggle, the Senate version continues to allow 457b contributions independent of 401k contributions.

According to Planadvisor.com https://www.planadviser.com/tax-bill-passed-senate-backs-off-457b-403b-plan-changes/
The last minute changes to the bill included removing the tampering to 457 plans.
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aceyou

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #70 on: December 10, 2017, 08:17:28 PM »
Still a terrible Bill IMO, but I'm glad things are looking positive for continuing 403 and 457 contributions. 

DavidAnnArbor

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #71 on: December 11, 2017, 10:36:32 AM »
Still a terrible Bill IMO, but I'm glad things are looking positive for continuing 403 and 457 contributions.

Yes it's still terrible. If I read this correctly, the bill will cut Medicare and Medicaid.  I can't believe they're going to do that.

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jean

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #72 on: December 11, 2017, 11:12:02 AM »
You can thank Susan Collins for saving this provision, and she'll fight to keep it during reconciliation.

http://www.cnn.com/2017/12/10/politics/susan-collins-tax-reform-vote/index.html

"One of the amendments she added would allow a deduction for property taxes, another would allow a provision protecting retirement benefits for employees of charities and local governments, and another would be a medical expense deduction."

Philosophically, I personally would like to see a universal limit for pre-tax retirement savings, but I'd like it to be higher.  Why 5,500 for an IRA and 18,000 for 401k?  Not everyone has a 401k.  And why do some lucky people also get this 457b?  Can others be given access to it?  (It would probably cost too much.) 

Taking off the philosophical hat.... I'm maxing out a 457b and 403b for as long as I'm allowed to, and really happy about that!

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Re: Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill
« Reply #73 on: December 12, 2017, 12:08:07 PM »
You can thank Susan Collins for saving this provision, and she'll fight to keep it during reconciliation.

http://www.cnn.com/2017/12/10/politics/susan-collins-tax-reform-vote/index.html


Good idea, I just sent her a thank you email a moment ago.