Tax Reform Impact on 401K and NUA | Ed Slott and Company, LLC

Tax Reform Impact on 401K and NUA

Does anyone know if either the proposed House or Senate Tax bills impact tax treatment of NUA or 401K's? Specifically will NUA rules be changed in any way starting in 2018? Thanks for your help!

Of course, each body produces their own bill to vote on and the proposals are changing daily. Once voted on the bills have to be combined, and therefore re negotiated. I have not read these entire bills, but have not heard of any potential changes in NUA. For awhile there was to be a limit on pre tax 401k contributions, with the rest having to be designated Roth, but that changes every day as well. Another expected provision that was sort of expected apparently has not surfaced, that being a mandatory 5 year rule for non spouse beneficiaries.

Thank you Alan for your reply.  I assume changes to NUA tax treatment are not being addressed at this time, which would imply no changes for 2018.

The House version of the Bill repeals recharacterization of amounts converted from an IRA to a Roth IRA. What isn't clear is whether this repeal affects any conversions beginning for tax year 2018, leaving the ability to recharacterize 2017 conversion amounts until October 15, 2018, or whether the proposed repeal is effective for any attempted recharacterizations made after December 31, 2017.

Of course, any such provision should be triggered by the conversion, so the taxpayer knows when the conversion is done whether they will get a "redo" of that conversion or not. Conversion dollars will drop if there are no recharacterizations allowed, which might eventually offset the expected revenue gains. No guarantee that any final provision will be logical however. The IRS would issue the final Regs and certain clarifications can be made by the IRS.


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