Savings Enhancement by Alleviating Leakage Bill Introduced in Senate

June 24, 2011

Senators Herb Kohl (D-WI) and Mike Enzi (R-WY) introduced in May 2011 the Savings Enhancement by Alleviating Leakage in 401(k) Savings Act (SEAL Act, S. 1121) to reduce pre-retirement leakage from retirement plans.

The bill extends the time for participants to make a contribution to offset outstanding loans at separation from service from 60 days to the tax filing deadline (including any extensions) of the year in which the participant separated service. Such contributions would not count against IRA or plan contribution limits. The SEAL Act also would change hardship distribution rules to eliminate the prohibition on making contributions for six months after taking the disbursement and would prohibit plans from making loans through the use of credit cards.

While this bill targets ERISA plans, both the extended contribution opportunity for plan loan offset amounts and the credit card prohibition would apply to 457 plan loans.