New Bill Introduced to Protect 401(k) Funds

12:12 pm Uncategorized

Capitol Hill e1305918676560 New Bill Introduced to Protect 401(k) FundsA new bill has been introduced in Congress that would limit the number of times you can take out a loan on your 401(k) and make it easier to pay back.

Currently, employers make the decision on how many times an employee can take out a loan against their 401(k) plan.  The bill introduced by Wisconsin Democratic Senator Herb Kohl and Wyoming Republican Senator Mike Enzi would limit to three the number of loans workers could take out, and bans the use of 401(k) debit cards.

The bill also makes it easier to repay the loans by giving workers with outstanding 401(k) loans more time to repay those loans without facing penalties if they leave their jobs.  Currently, workers face steep tax penalties if they leave a job and don’t repay the loan within two months.

Under the new legislation, workers could also have the option to repay 401(k) loans free of penalty if they repay their loan into an IRA by April 15 of the following year.  Unemployed workers with outstanding 401(k) loans would also be allowed to continue making voluntary contributions to their 401(k) for six months after they lose their job.

The authors of the new legislation said it was their aim to make raiding retirement funds more difficult.  According to a recent Aon Hewitt study, almost 28 percent of American workers with a 401(k) had an outstanding loan against it.

Help is available to you by contacting your Southern California financial planning experts today.

 

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