During the Tuesday briefing, Schumer said the Senate Democratic plan would lift the cap on pre-tax contributions
for 401(k)s, create a new tax credit for companies who will match 401(k) contributions, and create a new auto-IRA program "for the one half of American workers under age 65" who don't have access to an employer-sponsored retirement plan.
Some plans allow for pre-tax contributions
, Roth contributions and post-tax contributions or a combination of these, and some plans allow for in-plan conversion of funds between the accounts.
For example, if their marginal tax rate is 25% and they contribute $1,000, they would save $250 in taxes, making the actual cost of pre-tax contributions
These clients should ensure that they are taking all steps possible to reduce AGI -- such as maxing out pre-tax contributions
to retirement accounts, health savings vehicles and dependent care programs.
And the limit on pre-tax contributions
to flexible spending accounts are now capped at $2,500 annually.
It ensures that highly-compensated employees can maximize their pre-tax contributions
to the plan; and
Adding a cash balance plan allows them to rapidly accelerate savings with pre-tax contributions
as high as $100,000 to $220,000, depending on their age.
The IRS said the changes immediately allow employers with cafeteria plans--plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits--to permit employees to begin making pre-tax contributions
to pay for the expanded benefit.
The IRS issued guidance announcing the changes immediately allow employers with cafeteria plans to permit employees to begin making pre-tax contributions
to pay for this expanded benefit.
In 2009 and 2010 pre-tax contributions
are limited to the lesser of $49,000 or 25 percent of the first $245,000 of net earned income (with sole proprietorships and partnerships the owners are effectively limited to 20 percent).
In 2010 pre-tax contributions
are limited to the lesser of $49,000 or 25% of the first $245,000 of net earned income (with sole proprietorships and partnerships, the owners are effectively limited to 20%).
One option would be to allow pre-tax contributions
to employee-pay-all VEBAs for all workers.