Senator to Target 401(k)s With Tax Reform Amendment: Report

Sen. Orrin Hatch, R-Utah, will propose an amendment removing tax-free status from "catch-up" contributions to 401(k) retirement accounts, according to Bloomberg News.

Hatch, the Senate Finance Committee chairman, will introduce his amendment during the tax reform negotiations over the next few weeks. Republicans are trying to find offsets to fund their $1.5 trillion tax-cut plan.

The Hatch plan would raise the "catch-up" contribution amount permitted by individuals over age 50, but only in Roth accounts. Currently, the law allows anyone over 50 to deposit up to $6,000 in pretax 401(k) accounts, on top of the standard $18,000 limit.

The idea is to give a tax break to those who might be behind on saving for retirement. The Hatch plan would raise that catch-up figure to $9,000, but Roth plans are after-tax dollars, so the federal government would collect its cut upfront.

The House and Senate have differing versions of the Tax Cuts and Jobs Act. But both seek to cut corporate taxes from 35 percent to 20 percent.

Republicans have flirted off and on with taxing retirement plan contributions, but the idea is political wildfire. Instead, they are nibbling around the edges for any revenue they can find. The Senate plan already bars catch-up contributions by anyone making at least $500,000.

Hatch introduced a second amendment that would prohibit the reclassification of Roth IRA contributions as traditional IRA contributions. The amendments are among the 355 filed by members of the committee on both sides of the aisle, Bloomberg reported.

Not all of the amendments will be attached to the final bill, but filing them gives senators the option to do so.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.