Two senators reintroduced legislation Tuesday that would give those who borrow against their 401(k) plans more time to replenish their accounts after leaving a job.
The bipartisan proposal, the Shrinking Emergency Account Losses (SEAL) Act, sponsored by Sens. Bill Nelson, D-Fla. and Mike Enzi, R-Wyo., would give workers who leave their jobs up until they file their federal taxes to repay money they’ve taken out of their company’s retirement plan.
Under current law, workers have 60 days to repay any loans or withdrawals following their separation to avoid paying tax penalties. According to a 2011 study by the consulting firm Aon Hewitt, nearly 70% of employees default on outstanding retirement account loans after leaving a job, the senators said in reintroducing the bill.
“We need to give folks more incentives to continue saving for their retirement,” said Nelson, who chairs the U.S. Senate Special Committee on Aging, in a statement. “Giving them extra time to restore money owed to their 401(k)s is one way we can help cut down on lost retirement savings.”