Senate Democrats are proposing legislation to increase pre-tax savings for 401(k) accounts, announcing their plan a day ahead of a GOP proposal that may increase taxes on retirement accounts.
“What the Republicans plan to do to 401(k)s is an immediate tax hike on American retirement plans, period,” Senate Minority Leader Chuck Schumer, D-N.Y., said.
Democrats said their plan would raise pre-tax savings allowances for the popular 401(k) accounts from $18,500 under current law that begins in 2018 to $24,500.
The plan would allow those over 50 to save an additional $6,000 per year tax free, bringing their total to $30,500.
Schumer called on the GOP to drop their tax reform proposal and instead work with Democrats to expand pre-tax savings for 401(k)s.
“We make it easier for Americans to retire in a decent way, rather than harder, like Republicans do,” Schumer said.
The Democrat’s proposal comes one day ahead of the House GOP’s plan to unveil their own tax plan.
Details have not been released, but some reports indicated Republicans are considering shrinking 401(k) pre-tax allowances to $2,400.
The plan pitched Tuesday by Democrats would also create a new tax credit for companies who match 401(k) contributions and it would create an “auto” IRA savings plan for those who don’t have access to an employer-sponsored savings plan.
Congress earlier this year rolled back and Obama administration regulation that would have made it easier for states to automatically enroll workers in a savings plan.