From Cynthia Scott of OMC Financial Services:
New legislation is proposed to regulate loans from 401k plans
**The proposed legislation is referred to as the Seal 401k Savings Accounts
**There are four major changes, two will be discussed today and two on May 31.
>>Extends the time an individual who loses his/her job has to pay back a 401k loan
Currently a loan from a 401k must be paid back usually within 60 days when an employee leaves their job; if it isn’t paid back, the entire loan becomes taxable income and may also be subject to a 10% IRS penalty, if under 59 ½
New proposal allows the individual more time to pay back the loan up until they file their income taxes
>>Reduces the number of loans the individual can take at one time
Currently employers determine the number of loans that an individual can take
New proposal would limit the number of outstanding loans to three at any one time
New proposal would still allow employers to reduce the number of loans to less than three for their plan
