Reader Responses November 13, 2017

SURVEY SAYS: Most Beneficial Tax Reform Provision for Retirement Savers

A tax reform bill was introduced by the U.S. House of Representatives.

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Last week, I asked NewsDash readers, “Of the provisions affecting retirement plans, which do you think would be MOST beneficial to retirement savers?”

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Two-thirds (66.7%) of responding readers work in a plan sponsor role, 26.2% are TPAs/recordkeepers/investment managers and 7.1% are advisers/consultants.

Of the provisions in the recently proposed tax reform legislation that were listed (It was not an exhaustive list of provisions), nearly half (47.6%) said maintenance of the limit on the amount of contributions that can be made to defined contribution (DC) plans on a pre-tax basis is the most beneficial to retirement savers. More than one-quarter (28.6%) chose “60-day-period to come up with an outstanding loan balance upon termination of employment or plan termination and roll the amount into an IRA or eligible retirement plan,” 14.3% selected “deletion of the six-month suspension of DC plan contributions after taking a hardship withdrawal” and 9.5% chose “allowance of a hardship withdrawal without taking a plan loan first.”

In verbatim comments, one reader isn’t sure any of the provisions are helpful to retirement savers, while another said a couple of the provisions listed are detrimental. A couple of readers believe the provisions will not pass. Editor’s Choice goes to the reader who said: “DB plans are still the most efficient method of delivering retirement income.”

Thanks to all who participated in the survey!

Verbatim

We need to make it easier for employees to save for retirement, NOT HARDER!

All of these are important and beneficial, but obviously maintaining the pre-tax limit will have the widest applicability.

It will be interesting to see how the initial impact on non-qualified plans changes as the bill makes its way through the legislative process.

In order to bring in more tax revenue, I wouldn’t oppose a lower limit on 401k deductions say around $10,000. Most people who really need to save for retirement are saving much less than that per year anyway and anyone who can afford to save $10,000 will probably invest outside of a 401k anyway.

The 2nd & 3rd options are detrimental, not beneficial, to retirement savings. If one needs a hardship withdrawal, then they shouldn’t be contributing. Loans on a DC plan are also not positive if one is wanting to retire. Loans on our plan are not allowed.

NEED THE REFORM SO HOPE SOME OF THE PROVISIONS COME THROUGH

None of these will pass.

Not sure any of the changes are really beneficial to help someone save for retirement.

Considering that there is an indication that the political tide is turning, I don’t think there will be a tax bill enacted in 2017.

DB plans are still the most efficient method of delivering retirement income.

it is not the bill itself that will be the biggest impact, it is all the unintended consequences that will have the most impact.

Although easing hardship withdrawals over loans probably won’t increase savings, it eases administrative burdens and makes sense for that.

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Strategic Insight or its affiliates.
Compliance November 10, 2017

The SEC Forms Fixed Income Market Structure Advisory Committee

The committee's initial focus will be on the corporate bond and municipal securities markets.

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The Securities and Exchange Commission announced the formation and first members of its Fixed Income Market Structure Advisory Committee. The committee is comprised of a diverse group of outside experts, including individuals representing the views of retail and institutional investors, small and large issuers, trading venues, dealers, and self-regulatory organizations, among others. 

The committee will be formally established on November 15 for an initial two-year term, which can be renewed by the Commission.   

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Its initial focus will be on the corporate bond and municipal securities markets.  Members of the committee will provide advice to the Commission on the efficiency and resiliency of these markets and identify opportunities for regulatory improvements. Despite a rocky bond market, currently bond prices are high but their yields are low.  

“During the past several years, the fixed income markets have changed significantly,” said Commissioner Kara Stein. “The Fixed Income Market Structure Advisory Committee should provide the Commission with new ideas about how to enhance the efficiency and resiliency of these evolving markets.”

“Individual investors are highly active in fixed income markets, both directly as retail investors and indirectly through various types of funds,” said SEC Chairman Jay Clayton. “This committee will help the Commission ensure that our regulatory approach to these markets meets the needs of retail investors, as well as companies and state and local governments.”

The Commission will announce further details about the committee in the near future. 

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