Gas prices are up, food prices are up. The pressure is on from all corners...
Tough economic times mean that your employees will be looking for nickels and dimes in the sofa but also in the workplace - by looking to tweak their tax withholdings, opt out of medical employee contributions, and other extreme measures.
It's up to you to provide counsel to them. One tool that some take advantage of, in times like these, is the 401k loan. It's a bad idea from a retirement standpoint but part of the plan. Most 401k loan programs have enough hoops and come with enough penalties and poison pills that employees look elsewhere for cash.
A new kind of economic crack has hit the streets - the 401k Debit Card....From the Wall Street Journal:
"Debit cards are straightforward. You use them for purchases and money is deducted from your bank account. But when the debited account is your 401(k) retirement plan, critics angrily line up to take a swipe at that piece of plastic.
It isn't hard to see why. The 401(k) debit card lets you borrow from retirement savings and pay yourself back with interest over time, much as you would with a typical 401(k) loan. Only the card makes it much easier to crack your retirement nest egg; all you do is shop, swipe and sign.
To the advisers, brokers and financial institutions pushing workers to save more for their futures and consider the 401(k) sacred, this debit card isn't just objectionable, it is blasphemous.
The rub is that employees evidently like the ability to borrow; studies show it actually makes them more likely to contribute to a retirement plan. Most 401(k) participants have access to loans and about 20% have gone through hoops and hassles to get one.
Yet employers seem to be drawing the line with the debit card. Although the product has been around for several years, few companies offer it. They are focused more on automatically enrolling U.S. workers in plans, not handing out quick and easy loans.
One advantage of a debit card is that if you are laid off or leave the company, there may be no pressure to reconcile the debt immediately. With a typical 401(k) loan, the outstanding amount must be repaid in full, usually within 90 days. Otherwise the loan amount is considered a taxable distribution."
I'm sympathetic to those who need cash, but the 401k Debit Card makes it too easy. When a vendor comes around to sell you on these, do humanity a "solid" and just say no...