A bill sponsored in part by U.S. Senator Mike Enzi aims to give workers who leave their jobs more time to repay money they’ve taken out of their company’s 401(k) retirement plan. The bipartisan proposal was reintroduced in the U.S. Senate on Tuesday.
The Shrinking Emergency Account Losses Act would give workers who forgo employment up until they file their federal taxes to repay money they’ve taken out of their company’s retirement plan.
Current law stipulates workers have 60 days to repay any loans or withdrawals following their separation in order to avoid paying any tax penalties. Senator Enzi explains what the reasoning is behind the legislation.
In a media release, Enzi says based on a 2011 study nearly 70 percent of employees default on outstanding retirement account loans after leaving a job. Today, more than one in four Americans are dipping into their retirement plans to cover expenses not related to retirement.
The bill would also allow employees to continue to contribute to their 401(k) plans during the six months following a hardship withdrawal - a practice which is currently prohibited.