The House Ways & Means Committee has released a brief outline of proposals to enhance retirement and other tax-advantaged savings programs. These are to be included in what House GOP leadership calls Tax Reform 2.0, to be tax cuts beyond those contained in the Tax Cuts and Jobs Act of 2017.
The most high-profile element of Tax Reform 2.0 is to make permanent individual taxpayer tax cuts, which under the terms of the 2017 legislation will otherwise expire in 2026. Corporate tax cuts, on the other hand, are permanent under the terms of the Tax Cuts and Jobs Act.
Capitol Hill watchers differ in their assessment of the seriousness of the House Tax Reform 2.0 proposal, since relatively few believe such legislation can garner the necessary votes to be passed by the Senate; that would be necessary for it to become law. Some see the House effort as being of potential political benefit in the run-up to the November midterm elections—an effort to depict House Republicans as favoring individual tax cut permanence and House Democrats in opposition.
Actual legislative text of Tax Reform 2.0, including its savings-related provisions, has not yet been released. This is expected as early as the week of September 10. Based on the brief descriptions in the latest Ways & Means Committee news release, the following provisions are expected to be included in Tax Reform 2.0.
- Enhance the ability of individual employers to join in commonly-administered multiple employer plans (MEPs)
- Extend the deadline by which a new retirement plan can be established for a given tax year
- Simplify the rules for participation in employer plans
- Allow small retirement account balances to be exempt from required minimum distribution (RMD) requirements
- Allow Traditional IRA contributions at any age (no longer ending eligibility at age 70½)
- Liberalize rules to better allow military reservists to maximize retirement savings contributions
- A Universal Savings Account—usable for any purpose and with no required distributions—would resemble a Roth IRA; no tax deduction, but tax-free earnings
- Section 529 education savings program qualified expenses would to include apprenticeship fees, home schooling, and student loan expenses
- A “new baby” provision would allow excise-tax-free early distributions from retirement accounts, with the option to later replenish such amounts
As noted above, despite likely bipartisan support for a number of these provisions, the odds of enactment are uncertain at best. Watch this Ascensus.com News for updates.