The Tax Cuts and Jobs Act made significant changes to the tax code and will have a significant impact on businesses and individual taxpayers. However, although initial proposals included potentially significant changes to employer-sponsored retirement plans, the impact of the final bill on employer sponsored retirement plans will be relatively minor.

The Tax Cuts and Jobs Act (the Act), which was signed into law on December 22, 2017, represents the most sweeping overhaul of the tax code in decades and will have a significant impact on businesses and individual taxpayers. However, there are no major changes to the structure, type or amount of benefits that may be provided by employers through their tax-qualified retirement plans under the new law. Early proposals suggested that Congress might attempt to significantly reduce the limit on employee pre-tax deferrals to employer-sponsored plans, but the Act does not reduce contribution, benefit or compensation limits in 401(k) plans, does not cap wages on pre-tax catch-up contributions, and does not change the rules for pre-tax contributions to 403(b) and 457(b) plans.

In addition, the Act does not expand the in-service withdrawal rules available to defined benefit and money purchase plan participants, and does not make permanent the nondiscrimination testing relief for closed defined benefit plans previously established by Notice 2014-5 and extended earlier this year, which were proposals approved by the House in an early version of the Act. Similarly, the Act does not make changes to hardship withdrawal rules, such as the elimination of the requirement that employers suspend employee contributions under 401(k) plans for the six month period following a hardship withdrawal.

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