October 17, 2021

Volume XI, Number 290

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October 15, 2021

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Congress May Limit Pretax 401(k) contributions

With U.S. tax reform on the horizon, there are some reports that lawmakers are considering limiting annual pretax contribution limits to 401(k) plans to $2,400.  The current tax code allows most workers to contribute up to $18,000 on a pretax basis to 401(k) plans.  At this time, it is uncertain whether there will be any changes proposed.

On Monday, October 23rd, President Trump tweeted: “There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!”  Then, on Wednesday, October 25th, President Trump told reporters: “Maybe we’ll use it as negotiating but trust me … there are certain kinds of deals you don’t want to negotiate with”.

If there is a change to drastically reduce the amounts employees can contribute pretax to 401(k) plans, employers may look to other types of retirement plans in order to satisfy their employee retirement plan needs. For example, some employers may look to make contributions to a profit sharing plan instead of an employee bonus or salary increase. Also, employers may start looking to nonqualified deferred compensation retirement plans that allow employees to contribute above the pretax limits imposed by the Internal Revenue Code.  We will continue to monitor this and other tax reform developments.

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume VII, Number 299
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About this Author

Gregory J. Viviani, Squire Patton Boggs, Employee Benefits Lawyer,
Partner

Gregory Viviani focuses his practice on employee benefits. He has experience in all aspects of employee benefits law and related income tax matters including ERISA requirements, tax-qualified retirement plans, nonqualified deferred compensation plans, fringe benefits and employment taxes. He has particular experience in matters relating to governmental bodies and tax-exempt organizations.

216 479 8622
Matthew A. Secrist, Squire Patton Boggs, Employment Lawyer in Cleveland OH
Partner

Matthew Secrist focuses his practice on employee benefits and executive compensation matters. He has experience in a wide range of employee benefits matters, including tax qualified retirement plans, nonqualified deferred compensation plans and arrangements, welfare benefit plans, and COBRA, HIPAA and Patient Protection and Affordable Care Act issues.

He also advises clients regarding compliance with Code Sections 162(m) and 409A. His executive compensation experience includes employee fringe benefit plans, stock option plans, supplemental executive...

216 479 8006
Carl A. Draucker Tax Attorney Squire Patton Boggs Cleveland, OH
Partner

Carl Draucker focuses his practice on tax-qualified retirement plans, deferred compensation plans and executive compensation. Carl practices before the Internal Revenue Service and the US Tax Court. He has been listed in The Best Lawyers in America since 2005 and Chambers USA since 2006.

Carl has extensive experience in the employee benefits aspects of corporate and real estate transactions, including acquisitions, dispositions and mergers, and in all aspects of employee stock ownership plans.

216-479-8766
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