President Trump on Monday tweeted that changes won't be made to 401(k) plans after reports that congressional Republicans were considering a major alteration to the retirement accounts in forthcoming tax-reform legislation.
"There will be NO change to your 401(k)," Trump tweeted.
"This has always been a great and popular middle class tax break that works, and it stays!"
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!— Donald J. Trump (@realDonaldTrump) October 23, 2017
Financial industry stakeholders had heard that lawmakers are considering significantly reducing the amount that people can put into 401(k)s on a pretax basis.
Currently, people can generally make contributions of up to $18,000 annually before taxes. But lobbyists had heard that congressional Republicans were weighing lowering the cap to $2,400.
Stakeholders' concerns about the potential change were reported by The Hill and other publications over the last several days, putting a spotlight on the issue. Senate Minority Leader Charles SchumerChuck SchumerMcConnell signals Senate GOP will oppose combined debt ceiling-funding bill Centrist state lawmaker enters Ohio GOP Senate primary Biden discusses agenda with Schumer, Pelosi ahead of pivotal week MORE (D-N.Y.) also blasted the idea.
A lower cap on pretax contributions could shift taxpayers to "Roth" 401(k)s, in which people pay taxes on money when it's put into an account but not when it's withdrawn.
So-called "Rothification" could help lawmakers to raise revenue that could be used to help offset the cost of lowering tax rates. But critics of the idea view it as a budget gimmick and argue that it would likely reduce the amount that people save for retirement.
“President Trump made clear just how much retirement savings matter to families across the country,” the Save Our Savings coalition said in a statement.
“Meaningful retirement incentives help millions of hardworking, middle-class families plan for their future and any effort to reform the tax code must protect these families and the retirement planning they've depended upon for generations,” the coalition — which includes AARP, Financial Services Roundtable, and the Investment Company Institute — added. “The Coalition, representing millions of American consumers, families and retirees, was thrilled to see the President's statement today, though we will continue to fight to ensure lawmakers do right by the middle class by preserving and expanding our retirement system as tax reform moves through Congress."
It's unclear exactly how seriously lawmakers have been weighing a lower limit on pretax 401(k) contributions. The GOP's tax framework called for retaining tax benefits for retirement savings but also encouraged lawmakers to make simplifications.
The House Ways and Means Committee is expected to release a tax bill in the coming weeks, following the adoption of a budget resolution that would allow Republicans to pass legislation to rewrite the tax code on a party-line vote in the Senate.
With Trump taking changes to 401(k)s off the table, GOP lawmakers will need to look elsewhere for revenue to help pay for the tax cuts they want to make.
The budget resolution passed by the Senate last week only allows a tax bill to add up to $1.5 trillion to the deficit over a decade. The House is likely to pass the Senate's measure this week.
--This report was updated at 10:17 a.m.