In a report to Congress, the Government Accountability Office is asking lawmakers to lessen the restrictions for workers who want to make hardship withdrawals from their company-sponsored retirement plans.
Among the recommendations in the report:
- Congress should change the law that bars 401(k) plan participants from making new contributions until six months after making a hardship withdrawal. GAO wants workers to have the option to replenish their retirement accounts almost immediately after making hardship withdrawals.
- The U.S. Labor Department should encourage employers to post on their Web sites information on the long-term impact early withdrawals can have on employees’ 401(k) balances. For example, employers could provide participants with tools to help them calculate the long-term impact of early withdrawals of funds.
- Employers should provide employees who leave the company with projections showing how their account balances would compare at retirement if left in the plan or taken as a lump-sum distribution.
The report will and recommendations will be reviewed by the Senate Special Committee on Aging before any legislation is proposed.