The House Ways and Means Committee approved their tax reform proposal Thursday by a 24-16 vote along party lines.
The bill, which will be voted on by the full House later in the month, leaves intact the tax treatment of 401(k) contributions. Save Our Savings, a broad retirement industry coalition formed for the tax reform battle, applauded the vote.
"We remain extremely pleased that the House legislation continues to protect retirement savings, allowing millions of middle-class families to continue to have the freedom to choose the savings vehicle that best suits their needs," said the coalition, which pledged to continuing working with policymakers "to safeguard families, consumers, retirees and their savings."
The plan also eases some burdens on non-discrimination testing of benefit plans, but the current House committee version does not change highly compensated employees' ability to use non-qualified deferred compensation plans to boost retirement savings.
The proposed Tax Cuts and Jobs Act legislation makes significant changes to tax treatment of private university endowments, private equity firms and even public pension funds, all of whom would see their tax deductions reduced or new taxes imposed.
Larger private university endowments would see a new 1.4% tax on their net investment income.
Private equity, real estate and venture capital firms won a lower, 25% tax treatment of pass-through business income for partnerships, but lost the ability to deduct more than 30% of interest expenses in a single tax year. The ability for partners to pay a lower capital gains rate on carried interest was limited to investments held for at least three years; an earlier version had set the threshold at one year.
The proposal also limits or eliminates tax preferences for many types of bond issuers and highly compensated employees.
The Financial Services Roundtable called the Ways and Means vote an important step in the process, but said that "while there are many pro-growth aspects in the current version of the bill, there are areas of the bill that may need refinement as it works its way through the legislative process."
A Senate Republican proposal unveiled after the House committee vote also keeps pre-tax retirement contributions intact, but does not reduce the tax rate on partnerships' pass-through income.