There could be enough bi-partisan support in Congress to pass legislation to stem pre-retirement outflows from 401(s), said Senator Tom Harkin, who chairs a Senate pensions committee.

“There is not a whole lot of difference politically in the parties” on thei issue, despite deep divisions in Congress on other matters, Harkin told Financial Advisor yesterday. Harkin, (D-Iowa), is chairman of the Senate Health, Education, Labor and Pensions Committee.

Proposals that would make it harder to withdraw employer contributions before retirement and easier to roll over a 401(k) after a job change also could get enough support to become law, he added.

Lamar Alexander (R-Tenn.), lead Republican on the pensions committee, said he’d like to see 401(k) portability made simple with “a one-page form. Fill it out and that all there is to it.”

He said he is extremely worried 401(k)s are becoming simple savings accounts rather than retirement plans.

At the hearing, estimates were presented that 20 cents 25 cents out of every dollar contributed to 401(k) are taken out for non-retirement purposes, often referred to as "leakage."

Early in the session, Harkin said the nation is facing a retirement crisis, with Americans having $6.6 trillion less in savings than they should to live past their working years. He said half of Americans have saved less than $10,000.

Alison Borland, the head of retirement research for Aon Hewitt, the largest independent retirement plan administrator in the country, offered the  eight suggestions to decrease "abusive" leakage:
•    Limit pre-retirement loans and withdrawals to employee contributions and make them available only with documentation of need.
•    Reduce the maximum dollar amount for loans and withdrawals.
•    Establish a 12-month waiting period between the time a new loan can be taken after repayment of a prior loan.
•    Increase the tax penalty to 15 percent or more for withdrawing money before the appropriate age.
•    Allow defined benefit plan sponsors to eliminate lump-sum options.
•    Encourage lifetime income.
•    Educate workers about the benefit of retaining dollars in their employer plan after employment termination and/or encouraging rollovers into employer plans.
•    Promote financial literacy.