Since the 20% deduction of qualified business income means that a self-employed individual will be taxed at a lower rate than an employee performing substantially the same work with a broker/dealer firm, might more brokerage employees be driven to act as independent contractors?
Alongside numerous proposed changes, employees who work for three consecutive years with at least 500 hours of service each year would have to be made eligible to participate in an employer’s plan, but would be excluded from top-heavy and nondiscrimination testing.
It appears some last-minute amendments have largely removed controversial provisions from the Senate’s version of tax reform legislation that would have had a big impact on governmental 457 and nonprofit 403(b) plan sponsors.
With the passage of the Senate’s version of tax reform, the stage is set for a bicameral conference committee process through which a select group of legislators will try to rectify the House and Senate bill texts.
Analysts warn it’s too soon to tell what middle ground, if
any, may be reached between the House and Senate; for now 401(k) retirement
plan deferrals appear to be mostly unaltered, but other important changes are
Industry observers are pleased to see the overall deferral
limits for 401(k) plans left unaffected, but there are still some important changes
included in the bill concerning the treatment of DC account loans, hardship withdrawals, nondiscrimination
testing, and more.
It appears 401(k) contributions won’t be affected by tax
reform, but one industry veteran warns the process is still only just beginning—and
that tax uncertainty is “unfortunately not likely to ever go away.”