Legislation was introduced in the U.S. Senate this week that would limit a person's ability to tap into their 401(k) plans, according to Bloomberg. The bill would reduce the number of loans people can take from their plans and allow for more time to repay funds after changing jobs. Debit cards directly linked to these accounts would no longer be allowed.
"Because of the difficult economic times, more and more Americans are treating their retirement accounts as rainy day funds," Senator Herb Kohl, a Wisconsin Democrat, said in a statement. "A 401(k) savings account should not be used as a piggy bank."
When people take out a loan on their policy they are usually required to pay it back within 60 days of leaving a job, according to the news source. However, 70 percent of people in this situation end up defaulting on these funds and they get counted as taxable income, even if they are used to purchase a life insurance policy. The bill would extend that 60-day window and may lessen the burden on jobless workers, the media outlet reports.