Tax writers on the House Ways and Means Committee are considering creating new tax-incentivized savings accounts for all Americans.
Through a spokesperson, Rep. Kevin Brady, R-TX, chair of the Ways and Means Committee and the chief writer of a tax reform bill that will be released on November 1, confirmed that Universal Savings Accounts “are part of the conversation.” He would not confirm that they would definitely be included in the bill.
Nor would Brady confirm that the creation of the new savings vehicles would be used to justify lower limits on contributions to traditional 401(k)s and IRAs.
On Monday, President Trump vowed to protect the tax-deferred treatment of traditional 401(k)s after media reports that lawmakers were considering capping the pre-tax contributions to 401(k)s at $2,400, dramatically lower than the $18,000 cap allowed in 2017.
But on at least two occasions since the President tweeted that 401(k)s would not be touched under tax reform, Rep. Brady said the tax preferences on retirement plan contributions were still under consideration.
“We want Americans to save more, and save earlier in their life, and earlier in their incomes,” Brady (pictured at right) said at a conference hosted by the Securities Industry and Financial Markets Association.
“At the end of the day, we are taking a fresh look at savings plans and savings vehicles,” added Brady.
Today, President Trump walked back his vow to protect 401(k) contributions.
“Maybe it is and maybe we’ll use it as negotiating,” the President said when asked whether the proposal on 401(k)s was off the table.
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Universal Savings Accounts
Universal Savings Accounts emerged as a proposal in the House Blueprint on Tax Reform.
They were also introduced in proposed legislation as recently as February of this year, when Sen. Jeff Flake, R-AZ, and Rep. Dave Brat, R-VA sponsored the Universal Savings Account Act.
USAs are designed to incentivize general savings. Under Flake and Brat’s legislation, anyone age 18 or older could contribute $5,500 annually to the accounts on an after-tax basis, like Roth IRAs.
Cash could be invested in stocks or bonds, and investment gains would grow over time tax-free, comparable to savings in Roth 401(k)s and Roth IRAs.
Unlike 401(k)s and IRAs, distributions from USAs could be made at any time, for any reason—not just for retirement.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
