Last week, Kevin Brady, Chairman of the House Ways and Means Committee, introduced the Retirement, Savings, and Other Tax Relief Act of 2018. The legislation incorporates several provisions from the Senate’s proposed Retirement Enhancement and Savings Act of 2018 (RESA), which was introduced in March but has not been voted on. The House version of RESA has more than 80 bipartisan cosponsors.
Among other features, the legislation proposes sweeping changes to retirement provisions, including amending rules pertaining to using annuities in 401(k) plans and requiring service providers to illustrate investor account balances as projected income streams in retirement on an annual basis. Other proposals in the bill would bump the auto-enrollment safe-harbor cap (currently 10%) and the auto-enrollment tax credit for small businesses.
For workers nearing or in retirement, the bill proposes doing away with the maximum age for traditional IRA contributions. Currently, individuals over age 70 ½ may not contribute to a traditional IRA (although they may contribute to Roth IRAs, as long as they are still working).
Another section of the bill proposes repealing required minimum distributions for savers with less than $50,000 in their retirement plans.
When Might the Bill Become Law?
Although Brady claims the bill has bipartisan support and could be enacted before year end, some industry experts have doubts. The bill requires 60 votes to pass the Senate, including from Democrats. The House Rules Committee will vote on the bill sometime this week, before Congress adjourns on December 7.
The clock is ticking fast: as a result of the midterm elections, Democrats will take control of the House in January, and Brady will be out as Chairman at that time. We will continue to monitor developments and report back here.
Whether this proposed bill passes or not, taxpayers will still have to contend with the changes resulting from the Tax Cuts and Jobs Act of 2017 for the first time. If you’re still not sure how it affects your financial situation, we can help. Sign up for a no-cost, no-obligation conversation with a member of our advisor network today.