News is Slowly Emerging From Capitol Hill
The Tax Cuts & Jobs Act, passed in December 2017, and while some changes to defined contribution plans were discussed, none were included upon passage. In mid-September, the House Ways and Means Committee voted to forward the first major overhaul of the Tax Cuts Act - HR 6757, “The Family Savings Act of 2018” – to the full House for consideration by the end of September. The Act contains certain provisions of interest to defined contribution plans:
- 403(b) plans: If a plan is terminated and assets are distributed to participants, the Act would allow accounts transferred to non-bank trustees to be deemed IRAs; if an account is a designated Roth under the terminating plan, the transferred amount would be deemed to be a Roth IRA.
- Required Minimum Distributions, under the Act, would not apply to an individual whose retirement assets are less than $50,000. If an individual’s assets are greater than $50,000, the RMD would be limited to the amount in excess of $50,000. The earliest this provision would become effective would be 2019.
- Penalty-free withdrawals may become allowable for birth or adoption of a child. Such withdrawals must be made within the first year of birth or adoption, and the maximum would be $7,500 for each individual eligible to make such withdrawal.
Provisions would be effective at the end of 2018 unless otherwise noted. The House Ways and Means Committee has also issued a statement saying that “Rothification” will not be reintroduced.