New Sam Johnson legislation protects workers’ retirement funds
Nov 2, 2011 -
Today, U.S. Congressman Sam Johnson (TX-03) along with Congressman Richard Neal (D-MA) introduced legislation to protect 401(k) retirement savings by better preventing retirement leakage.
“More and more people are tapping into their retirement funds during challenging economic times, putting their financial security at risk,” said Johnson. “Rather than unnecessarily penalizing folks who take out 401(k) loans, we should help make it easier for them to protect their savings.”
The Savings Enhancement by Alleviating Leakage in 401(k) Savings Act, or the SEAL Act, would help protect Americans’ retirement savings by providing an extended repayment period for those who have taken out such loans. Currently, laid-off employees need to quickly repay the outstanding loan balance to avoid default and avoid a big tax bill.
“I don’t think the IRS should profit off of a worker’s job loss,” said Johnson. “Paying these loans back after losing a job is already hard enough. Owing the IRS money for not paying them quickly enough is just wrong.” Currently, workers who are unable to pay back their loans on time face ordinary income taxes plus a 10 percent early withdrawal penalty on their loans if they are younger than 59 ½ years old.
The SEAL Act would also allow workers who have taken out a hardship distribution to continue contributing to their 401(k) accounts. Right now participants are prohibited from contributing to their retirement accounts for the first six months. The bill would remove this obstacle that prevents greater retirement savings by individuals.
Johnson represents portions of Dallas and Collin Counties.
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