Just so everyone’s clear, President Trump’s tax plan will not affect 401k contributions after all. The clarification was needed after administration surrogates caused confusion in the wake of the plan’s release last week.
After initially saying it would not eliminate a deduction for participants in the 401k plans, press secretary Sean Spicer appeared to contradict (or at least introduce uncertainty into) the administration’s position that retirement plans would come through unscathed.
“Trump administration officials lacked consistency on that part of the tax proposal since they unveiled an outline of the president’s plan on Wednesday,” CNBC reports. “The White House proposed to remove nearly all tax deductions, including those at the state and local level.”
During his daily briefing Thursday, the network notes, Spicer was asked if Trump’s plan would affect 401(k) contributors. Spicer said that the plan protected charitable giving and mortgage deductions and “that’s it.”
He was pressed about it again during the briefing and backpedaled, telling reporters to “let me get back to you on that.”
After the briefing, the White House said Trump’s plan would not, in fact, affect 401k contributions.
The retirement plan industry is keeping a sharp eye on recent developments, and specifically how the tax reform proposal will affect 401(k)s, IRAs and similar retirement savings vehicles.
American Retirement Association CEO Brian Graff noted at the industry advocacy organizations annual conference in March that tax reform in 1986 reduced 401k limits by 70 percent.
“I know for a fact that many Republicans didn’t expect to win the House, Senate and the White House, and now they have to act,” he added.
Trump wants to reform the tax code by “closing loopholes,” but one man’s loophole is another man’s valuable deduction.
“Whatever happens, he [and congressional Republicans] want it to be revenue neutral; it cannot increase the debt and deficit,” Graff predicted.
At one point he paused for dramatic effect, and emphasized, “If tax reform happens, there is no way we come through unscathed. We might think it is crazy to reduce the 401k limit, but you have to understand tax reform is all about tradeoffs. Tax reform is ugly, but we have a seat at the table and are trying to make lemonade from lemons.”