US. How Tax Bill Affects Retirement Plans
The House tax bill doesn’t slash 401(k) pre-tax contributions, but that doesn’t mean it doesn’t affect retirement savings, writes InvestmentNews.
Example: under the House bill, employees would have more time to repay 401(k) loans if they leave the company or the plan is ended. The current window is 60 days; after that, the loan becomes a taxable distribution as well as a potential early-withdrawal penalty. The bill gives participants up to their tax-return due date to replace the borrowed amount.
Hardship distributions are affected as well. Participants will be allowed to continue contributions to their retirement plan even after they’ve taken a hardship distribution. Right now, employees have to suspend contributions for six months, InvestmentNews points out.
And under the House plan, hardship money could be taken not just from employees’ contributions, but from employer contributions and account earnings as well.
The bill also creates more flexibility for DB plans to make in-service distributions starting when participants reach 59½. Current rules set the in-service distribution age at 62.
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