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Senate Sneaks 401(k) Contribution Limits Into Tax Cuts Bill

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krishnamba:
https://www.forbes.com/sites/ashleaebeling/2017/11/10/the-senate-401k-grab/#47fa6aa66360

The Senate tax cuts plan released last night has sneaky provisions that limit the amount workers can save for retirement. High earners would be prohibited from making $6,000 catch-up contributions to 401(k) workplace retirement plans. That lets the Senate say it isn’t targeting 401(k) deferrals, but it’s a huge grab out of the $24,000 high earners can put away today ($18,000 elective deferral and $6,000 catch-up). In addition, the Senate proposal targets government workers who have both a 457 retirement plan and a 401(k) plan. No matter how much they earn, they wouldn’t be able to save to the max in both plans anymore at one employer. And special catch-ups for 403(b) and 457 plans would be restricted too.

ixtap:
That sounds way better than slashing it for the middle class.

I don't understand why they aren't targeting after tax contributions that end up rolled into Roth. I mean, why else would anyone make an after tax contribution other than a mega backdoor Roth?

FIREchiefsr:
Yep.  "Description of Proposal: Under the proposal, an employee may not make catch-up contributions for a year if the employee received wages of $500,000 or more for the preceding year."

seattlecyclone:
The catch-up contribution thing just doesn't seem like a big deal. That's something that approximately zero Mustachians should care about. Oh no, you can't deduct an extra $6,000 when you're over 50, earning half a million dollars per year, and somehow not retired yet.

Combining the 457 limit with the other plan limits so that public employees can't deduct $36k anymore sounds like something that would affect a lot more people on here. I have to say it's always seemed strange that you can do double retirement contributions if you work for certain government agencies. If I were king I'd take it a bit farther and eliminate all but one type of retirement account; there's no good reason for 401(k), 403(b), IRA, SEP, 457, etc. to all be things with their own little quirks. Just let everyone with a job put away money in the same kind of account with the same rules for everyone.

K-12FI:
Will admit; kinda bummed about the proposal for the 457/403(b). I finally paid off my student loans, plan to max out one of those next year and make progress on the second, then... *sigh*

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