happy holidays

November 2017

Inside this issue:


President Donald Trump vowed Monday to protect a popular retirement savings program, pledging to leave it untouched in the forthcoming Republican tax overhaul plan. Mr. Trump, in a tweet, shot down an idea circulating in Washington policy circles and worrying the retirement-savings industry: limiting pretax contributions to retirement accounts.

“There will be NO change to your 401(k),” the president wrote on Twitter. “This has always been a great and popular middle class tax break that works, and it stays!”

While we are relieved that the President vocally supports a necessary retirement vehicle, it is important to keep watch of what action policy makers actually undertake to the retirement structures created by the Internal Revenue Code. Whenever our government considers tax reform, traditional retirement vehicles (401(k), 403(b), 457, and defined benefit plans) are placed under the magnifying glass. We continue to be involved in conversations on Capitol Hill to help ensure the success of these retirement savings vehicles and will keep you, our valued partners, updated in regards to significant changes. 

That’s One Small Step for a Budget, One Even Smaller Step for Tax Reform
On October 19, 2017, the Senate passed a budget blueprint and sent it on to the House for approval. The budget resolution outlines federal spending and revenues but, in order to become official, it must match the blueprint passed by the House a few weeks ago.

While both the House and Senate versions aim to reduce the deficit, over the next 10 years, the House’s version calls for a tax plan that doesn’t increase the deficit while the Senate’s version would allow for a tax bill that adds up to $1.5 trillion to the deficit over that same 10-year period.  

How Does This Usually Go?
In a perfect world, both houses of Congress would pass a budget blueprint – like those just passed this month – by April 15. This would then give House and Senate Appropriations Committees the time they need to work on, and ideally pass, their spending bills by the Oct. 1 start of the fiscal year. This year, however, in a less-than-perfect manner, the end of the fiscal year came without appropriations bills for the upcoming year. 

Instead, President Trump worked out a deal with Democratic leadership to continue funding the government until Dec. 8. That deal effectively pushed the start of the fiscal year, to mid-December — giving Congress a few more weeks to finalize their appropriations bills.

What Happens Now?
Now that the Senate has passed its own budget blueprint – one that's different in many ways from the House’s version – it will go back to the House. Since both versions need to match, the differences between the House and Senate blueprints may cause additional delays. 

Listening to the pressure he’s receiving from Republican leadership, though, House Speaker Paul Ryan appears to be willing to move forward and pass the Senate’s version of the blueprint. The need to press onward is crucial because, as we noted earlier, without a joint resolution on the blueprint, the respective Appropriations Committees can’t move on to crafting their spending bills. While this late-night Senate is exciting action for all of us newly initiated political junkies, it’s truly significant because it's the first step to tax reform. The budget and appropriations bills must allow for tax reform – even if we don’t know what that will look like – so the reconciliation process can be used to pass the actual tax legislation with 51 votes in the Senate. 

If the House takes up the Senate’s version of the blueprint, the budget blueprint will include the ability to enact $1.5 trillion in tax cuts, which is the estimated cost of the Republican tax framework. It’s too early to tell if these discussions will target tax exclusions on employer-provided health benefits – or welcome developments for employers like an elimination of the ACA Cadillac tax or the expansion of health savings accounts – but we'll watch for developments should the GOP seek ways to offset tax cuts.

As always, stay tuned to our Washington Updates as we track tax reform’s progress from framework, to budget blueprint, to proposed legislation and outline the impact this could have on all of us.


The Internal Revenue Service has announced its 2018 inflation-adjusted retirement plan contribution limits for 2018. Deferral limits increased while catch-up limits remained unchanged. Most other limits and thresholds increased.

Because a market on guard for a rate hike is much less likely to be shocked by one, we believe this adds to the case that although rates may rise in response to a December rate hike, they may not rise violently, as witnessed in the taper tantrum of 2013.

Election-related volatility, further weakness in European banks, or other unforeseen events may throw a wrench in the Fed’s presumed plan to hike rates this year. Although our base case remains that the Fed will hike rates in December 2016, it is important to remember that this is not set in stone, and the Fed has held off previously in response to market-destabilizing factors. The Fed did so in response to equity market weakness following China’s currency devaluation in its September 2015 meeting and Brexit-related concerns in its September 2016 meeting.

  2016 2017 2018
401(k), 403(b), 457 Elective Deferral Limit
(calendar year)
$18,000 $18,000 $18,500
401(k), 403(b) & 457 Catch-Up Contribution Limit (calendar, plan or limitation year) $6,000 $6,000 $6,000
Annual Compensation Limit
(Plan year BEGIN)
$265,000 $270,000 $275,000
Defined Contribution Limit
(limitation year END)
$53,000 $54,000 $55,000
Defined Benefit Limit at ages 62-65
(limitation year END)
$210,000 $215,000 $220,000
Definition of Highly Compensated Employee (HCE)
(plan year BEGIN)
$120,000 120,000 120,000
Key Employee Compensation Threshold (plan year END)    
5% Owner All All All
Officer $170,00 $175,00 $128,700
Social Security Taxable Wage Base $118,500 $127,200 $128,700
IRA Contribution Limit $5,500 $5,500 $5,500
IRA Catch-Up Contributions $1,000 $1,000 $1,000
See www.irs.gov for more information      


The ongoing saga of the DOL’s fiduciary rule is now in its eighth year. The rule was first proposed in 2010 and promptly withdrawn amidst much controversy. The rule was re-proposed in 2015 and became final last year. Despite expectations that the Trump administration might scrap the Rule entirely, it has survived thus far.

The essence of the Fiduciary Rule is that any person making investment recommendations to plans, their participants or IRA holders, is acting as a fiduciary and may only make recommendations that are in the best interests of the client. Significantly, the Rule will apply where advisors recommend that participants roll their plan accounts to a retail brokerage account.

Some parts of the Rule took effect June 9th after a 60-day delay due to an executive order issued by President Trump in February. The new definition of a fiduciary and the new standard for investment advice are now in effect. The best interest contract exemption that allows for charging commissions in brokerage accounts, and certain other provisions, are scheduled to take effect January 1st of next year. The best interest contract exemption has been a major concern of the financial services industry.

Consistent with statements made by Alexander Acosta, the new Secretary of Labor, the DOL published a notice requesting comments on the Rule on June 30th. There was a 15-day comment period that ended July 21st to submit comments on postponing the January 1, 2018 implementation date. There is also a 30-day comment period that ends August 7th for comments regarding new exemptions or other revisions to the rule. These are short windows for comments. Comment periods for regulations usually run for at least 90 days.

The House of Representatives has now decided to enter the fray. The House Education and Workforce Committee will soon begin debating the Affordable Retirement Advice Savers Act. The stated intent of this bill is to “protect access to affordable retirement advice by overturning the Obama Administration’s fiduciary rule, while ensuring retirement advisers serve their clients’ interests. Supporters of the rule probably see this as a paradoxical statement. If this bill becomes law, it will effectively repeal the fiduciary rule.


No strategy assures a profit or protect against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

For Plan Sponsor use only – Not for use with Participants or the General Public. This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. 

Montgomery Retirement Plan Advisors does not warrant and is not responsible for errors or omissions in the content of this newsletter.

Montgomery Retirement Plan Advisors offers investment advisory services through Independent Financial Partners, a Registered Investment Advisor. Independent Financial Partners and Montgomery Retirement Plan Advisors are separate entities.

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Montgomery Retirement Plan Advisors offers investment advisory services through Independent Financial Partners, a Registered Investment Advisor. Independent Financial Partners and Montgomery Retirement Plan Advisors are separate entities. may only discuss and/or transact securities business with residents of the following states: Florida, Texas, California, Nevada, Ohio, Tennessee.