Although I don't like losing the choice of investing catch-up contributions to Traditional, I do like the increase to 9000 instead of 6000. By the time I'm eligible to do catch-up in 5 years, the rules will change again.MikeOn Wed, Nov 15, 2017 at 2:07 PM, sarah_oz@yahoo.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:The Senate Tax Proposal Could End Feds' Catch-Up TSP Contributions
November 14, 2017
Senate Finance Committee Chairman Orrin Hatch, R-Utah, is expected to introduce an amendment to the Republican-led tax reform initiative Tuesday that would restrict federal employees from making extra contributions to their Thrift Savings Plan accounts from pretax earnings.
Hatch reportedly plans to introduce a series of amendments to the Senate version of the Tax Cuts and Jobs Act (H.R. 1) Tuesday evening, along with a revised outline of the bill. Markup by the Finance Committee was originally scheduled to begin Monday, but Hatch delayed that, citing the need to change the bill to conform with the chamber's rules on budget reconciliation.
The chairman's retirement savings amendment, labelled Hatch No. 2 in his preliminary list of amendments, would increase the maximum catch-up contribution that all employees age 50 and older can make to their 401(k), 403(b) or 457(b) retirement savings plans in a given year from $6,000 to $9,000, but would require those contributions to be made to Roth plans only, meaning that the money would be taxed prior to investment, rather than when participants withdraw money after they retire. This would affect federal employees age 50 and older who make such extra payments to the TSP, the government-employee version of a 401(k) retirement program.
Under current law, in 2018, TSP participants would be able to contribute a maximum of $18,500 to their retirement accounts before investments are taxed, while employees 50 and older could contribute an additional $6,000 before their investments become taxable as income.
According to the amendment's description, it is "expected to raise revenue in the 10-year budget window." It comes in addition to an expected provision of the tax reform legislation that eliminates the ability for employees making at least $500,000 from making any pretax catch-up contributions to their retirement accounts.
Jessica Klement, legislative director of the National Active and Retired Federal Employees Association, said the proposal to change catch-up contributions requires significantly more study before it should be considered.
"While increasing the allowable 'catch-up' contribution makes saving for retirement easier, prohibiting any catch-up contributions from being made with pretax dollars makes it harder," she said. "We do not know how the combined change will affect retirement savings—but neither do members of Congress. This is a significant change to retirement saving incentives that is being pursued at the last minute, without adequate analysis or committee deliberation."
TSP spokeswoman Kim Weaver said her agency is in the process of reviewing the proposal.
The delay in releasing the text of the official Senate version of the tax reform bill, as well as accompanying amendments, drew the ire of Democrats on the Finance Committee Tuesday morning. Ranking Member Ron Wyden, D-Ore., said it is impossible to make informed questions or propose useful amendments without knowing what is in the bill.
"The idea now is that senators can ask questions about legislation that may not be relevant in five or six or maybe 10 hours," Wyden said. "This is further evidence that the Finance Committee isn't ready to proceed with a bill that makes trillions of dollars of changes to the tax code. This does not resemble, no matter how much my colleagues on the other side say otherwise, the regular order in the Finance Committee. This is reckless haste."
Senate Finance Committee spokeswoman Julia Lawless said that although Hatch has filed this amendment, that does not mean he will formally offer it when the committee marks up the bill in earnest later this week. She declined to say whether Hatch plans to do so.
"Just because amendments are filed, it does not mean that they will be included in the modified mark or offered during the markup," Lawless said in an email. "So at this point all of the amendments on our website are simply filed amendments and nothing more."
This story has been updated with comment from NARFE.
November 14, 2017
Posted by: GlobalTJB <globaltjb@gmail.com>
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