Two Republican members of the House of Representatives have introduced legislation that would raise the contribution limits for workplace plans and IRAs as a way to fight inflation.
Rep. David Schweikert (R-AZ), who is a member of the House Ways and Means Committee, along with Rep. Byron Donalds (R-FL), who sits on the Small Business Committee, on July 28 introduced the Retirement Protection Act (H.R. 8579) to help Americans protect their savings.
Under the legislation, the Code Section 402(g) annual elective deferral limits for 401(k), 403(b) and 457 plans would be increased by $4,000 for one year. This $4,000 increase would also apply for one year to the yearly contribution limit for both Roth and traditional IRAs. In the case of a contribution which is made after the first taxable year of an individual ending after the date of the enactment and before the April 15 tax-filing deadline following the close of the tax year, the taxpayer could elect to treat such contribution as if made during the taxable year.
For example, if the legislation is enacted this year, a taxpayer could contribute up to $24,500 to their workplace DC plan, compared with the current $20,500 limit. Similarly, a taxpayer could contribute up to $10,000 to their IRA, up from the current limit of $6,000.
The legislation also includes a boost to the Saver’s Credit similar to the provision contained in the SECURE Act 2.0 (H.R. 2954) approved by the House of Representatives in March and awaiting action by the U.S. Senate.
“This bill plays a critical role in fighting historic inflation by reducing liquidity in the economy,” Schweikert said in a statement upon introducing the legislation. “Allowing Americans to contribute more to their retirement accounts not only helps hardworking individuals add to their savings, but also serves as an alternative for funds that might be spent on inflated goods elsewhere.”
Added Donalds, “As we continue to stare down economic uncertainty and officially enter into a recession, financial planning is more important than ever. By increasing the contribution limits for IRAs and other retirement plans, Americans everywhere will be able to better prepare themselves for the future.”
The bill was referred to the House Ways and Means Committee. There does not appear to be a companion bill in the Senate, but it wouldn’t be surprising to see some lawmakers try to include this in the final SECURE 2.0 legislation.
