While the proposals are sponsored by Democrats , they are still on the table because

of the Republican party ’ s populist push to eliminate tax shelters for the wealthy while benefiting the middle class , Robinson said .

Normally you wouldn ’ t have the minority party ’ s proposals under consideration in a GOP-led Congress , “ but because this Republican party has more of a populist bent , there are two Democratic proposals still on the table ,” she said . “ The first one being an income cap on IRAs and the second being the elimination of the backdoor Roth . Both of these provisions are perceived as loopholes for the wealthy , and so I think with this particular Republican party there could be incentives to look at [ the elimination ] of these provisions as providing additional help for the middle class .”

Since 2021 , Democrats have been pushing to limit so-called backdoor Roths and tax IRAs with more than $ 10 million , which they hoped to subject to required withdrawals . They sought to use the revenue savings from these changes to finance President Biden ’ s failed $ 1.75 trillion “ Build Back Better ” plan . Backdoor Roth IRAs benefit high-income earners , permitting them to sidestep Roth IRA income tax limits by paying taxes to convert a traditional IRA into a Roth , where retirement savings can grow tax free and are no longer subject to required minimum distributions .

“ While the proposals are sponsored by Democrats , they are still on the table because of the Republican party ’ s populist push to eliminate tax shelters for the wealthy while benefiting the middle class .”

— Aliya Robinson , Director of Congressional Affairs ,

T . Rowe Price

The bill sought to eliminate backdoor IRAs for single filers with taxable income greater than $ 400,000 and married taxpayers filing jointly with income greater than $ 450,000 .

Democrats have also attempted to push for provisions that would “ Rothify ” all retirement plan contributions — eliminating the up-front tax-deduction on all contributions , but allowing assets to accumulate and be withdrawn tax free — but the move has been renounced by President Trump himself , Robinson said .

“ I think the amount of money involved is too high for this not to be part of the conversation in 2025 ,” Robinson said . “ We might not get to the same point as we got to during the previous administration where we were talking about completely changing the system , but I definitely think there will be suggestions for Rothifying part of the system or different pieces of it . As we ’ ve seen with different legislation over the past decade , every retirement legislation has included additional Roth provisions . I fully anticipate we ’ ll be having these discussions about [ Roths ] again ,” she added .

That still leaves Congress to figure out how to pay the bill for a very expensive extension of the 2017 tax cuts , made pricier with the additional provisions Trump promised during his campaign — including a corporate tax rate that would be lowered from 21 % to 15 %; the ending of taxation on tips , overtime pay and Social Security benefits ; and an increase in the cap on state and local tax ( SALT ) deductions . All told , extending Trump ’ s 2017 tax law would add $ 4.6 trillion to the national debt over the next decade , according to the Congressional Budget Office .

To pay for the tax cuts , Republicans have also proposed their own revenue raisers , according to Robinson . These include capping employer deductions for employee benefits ; the elimination of catch-up contributions for high-income employees in employer-sponsored plans ; the elimination of special 403 ( b ) catch-up and governmental 457 ( b ) catch-up contributions ; a prohibition of post-employment 403 ( b ) contributions ; an extension of the 10 % early distribution penalty to 457 ( b ) plans ; and the end of nonqualified deferred compensation , which pushes compensation back into later years .

T . Rowe Price executives expect the retirement industry lobby to roar into gear to attempt to block such moves . Michael Davis , head of global retirement strategy at T . Rowe Price , also commented during the policy briefing . “ As a firm we have been involved in those discussions as part of a broader aggregation of firms that are concerned about these kinds of things and the deleterious impact they can have ,” he said .

— Tracey Longo

14 | FINANCIAL ADVISOR MAGAZINE | JANUARY / FEBRUARY 2025 WWW . FA-MAG . COM