The American Society of Pension Professionals & Actuaries supports the introduction of the Shrinking Emergency Account Losses in 401(k) Savings Act of 2013 in the Senate.
The so-called SEAL Act was introduced March 19 before the U.S. Senate Committee on Health, Education, Labor and Pensions by Senators Nelson, D-Fla., and Enzi, R-Wyo. It would help safeguard the savings American workers have placed in their 401(k) plans by reducing the loss of savings from early hardship withdrawals and 401(k) plan loans outstanding when employment is terminated.
“More Americans save at work through an employer-sponsored retirement plan than in any other way. The power of their compounding retirement savings is weakened when the individual takes a hardship withdrawal from retirement savings or does not repay a loan from a 401(k) plan because it came due when employment was terminated,” said Brian Graff, executive director and CEO of ASPPA in a written statement. “We are mindful that some employees have serious immediate financial needs. Therefore, we believe it is important to minimize the harm that comes from accessing retirement funds for non-retirement purposes. The SEAL Act would be an important step toward addressing this problem.”
The SEAL Act proposes simple changes that will lessen the loss of retirement savings when an employee terminates employment with an outstanding loan balance, and reduce the long-term impact of hardship withdrawals. Specifically the bill extends the period that an individual retirement account can accept repayment of outstanding loan balances as a rollover from a qualified retirement plan. The bill also includes a provision that would allow participants to continue to make elective contributions during the six months following a hardship withdrawal. These provisions are sensible improvements to current law that will allow many Americans to keep more of their retirement savings working for them, Graff said.
The American Society of Pension Professionals & Actuaries is a national organization of more than 11,000 retirement plan and benefits professionals that serves as the educator, voice, and advocate for the employer-based retirement system.