The Bipartisan Budget Act of 2018, signed early on Fridaymorning after a delayed vote in the Senate forced a briefgovernment shutdown, included technical provisions that impacthardship withdrawals from retirement plans.

One provision allows defined contribution plan participants tocontinue deferring savings to plans after they have taken outhardship withdrawals.

Previously, contributions were prohibited for six months. Therevision applies to plans beginning next year.

Participants will also be able to tap assets in profit-sharingplans, employer matches, and earnings on contributions for hardshipwithdrawals. And participants will not be required to first takeout a plan loan before claiming a hardship withdrawal.

The budget deal also extends relief to victims of the Californiawildfires, who will be able to draw up to $100,000 from qualifiedplans without paying the 10 percent early withdrawal tax.Comparable relief was extended to victims of last year’shurricanes.

The budget deal did not include limitations of pre-taxcontributions to retirement plans.

Last year, Congress scuttled proposals to place limits onpre-tax contributions in the lead up to the Tax Cuts and Jobs Act.

Though proponents of the existing retirement system dodgedanother bullet in the most recent budget negotiations, GeoffManville, a principal at Mercer, said retirement plans willcontinue to be in play as potential revenue raisers forCongress.

“That includes so-called Rothification,” Manville recently toldBenefitsPRO, referring to proposals to cap pre-tax contributions todefined contribution plans and IRAs.

Last fall, Republican lawmakers were reportedly consideringcapping pre-tax contributions to 401(k) plans at $2,400. Deferralsabove that threshold would be made on an after-tax, or Roth basis.President Trump emphatically denounced the idea.

“I don’t think there will be any consideration to something asbig as that proposal,” said Manville, who works on Mercer’sgovernment affairs team and is based in Washington, D.C. “That’snot in the cards. But more modest revenue raisers could still beattractive pay fors going forward.”

Manville says the $2,400 threshold was likely drawn from data onmedian 401(k) contributions.

Later provisions in the proposed tax legislation includedeliminating pre-tax catch-up contributions for higher earners, andremoving special catch-up provisions for participants in 403(b)plans. Both were removed from the final tax bill, and neither wasused to raise revenue in the budget deal.

The Bipartisan Budget Act adds $420 billion of debt in temporaryspending increases. Economists at the Committee for a ResponsibleFederal Budget estimate the deal could add $2 trillion in debt over10 years if temporary provisions are made permanent.

At some point, lawmakers may be left with little choice but torevisit the tax treatment of retirement plans, suggestedManville.

Pre-tax contributions to 401(k) plans and IRAs account forhundreds of billions in so-called foregone revenue when consideringthe federal budget within a 10-year window.

But withdrawals from traditionally structured retirement plansare of course ultimately taxed in retirement, as opposed to Rothwithdrawals, which are taken tax-free.

That reality raises real questions as to whether or not pre-taxcontributions are ultimately more valuable to federal coffers thanRoth contributions.

The consensus among retirement experts is that saving on a Rothbasis makes sense for some; younger savers and wealthier savers canbenefit from a plan that allows for tax-free retirement income.

But most experts also agree that middle-class savers need taxincentives to save the maximum amount, or at least enough tobenefit from employer matches.

Manville said that Mercer would not support any policy thatdisincentivized retirement savings, even if it only impactedcatch-up contributions for higher earners.

“It’s a bad idea to experiment with people’s retirement plans,”he said. “Thinking in terms of short-term revenue considerationshas the potential to damage retirement security prospects. Wewouldn’t be inclined to support anything that diminishes currentincentives. People need all the incentives they can get.”