Senate Democrats unveiled their plan for tax reform late Tuesday that calls for raising limits for 401(k) contributions and creating options for workers without access to them.
Congressional Republicans are delaying their tax reform proposal until Thursday, but House Ways and Means Committee Chairman Kevin Brady, R-Texas, said the committee is on schedule to approve a bill early next week.
The Senate Democrats' plan calls for expanding annual 401(k) contribution limits to $24,500 from the current level of $18,500, and keeping the additional limit of $6,000 for people 50 and older.
Employers would have an incentive to match employees' contributions through a suggested 25% tax credit on the employer's match, in addition to keeping the current pretax treatment. Democrats said at a press conference Tuesday that they are open to working with Republicans on the size of the tax credit.
Workers without employer-sponsored retirement plans would be automatically enrolled in an auto-IRA program through their employer's payroll deduction contributions, with contributions set at a default rate that would later escalate. Workers could opt out or change their savings rate, and could choose between traditional pretax or a Roth aftertax IRA.
The Senate Democrats criticized Republican plans to change contribution limits, saying "the Trump administration and many Republican members have failed to assure Americans that they will protect their 401(k) plans, which would actively harm millions of Americans' ability to save for retirement," according to a statement.
Mr. Brady said he doesn't plan to reduce pretax contributions by workers "unless there's broad agreement" among investment advisers that a different system would induce workers to save more. Karen Barr, president and CEO of the Investment Adviser Association, said her members are "strongly opposed to Rothification and we are actively advocating against it. We are strongly supportive of preserving and enhancing saving options for 401(k) and other retirement plans."
