"Plan sponsors have historically been reluctant to get involved in product issues unless forced to," says Noel Abkemeier, an actuary at Milliman Inc. in Williamsburg, Va. "They feel their fiduciary responsibilities deter them from appearing to endorse a product. This may make it difficult to get products inside a plan."

There is also an opportunity for advisors to capture more of the IRA rollover market. The high balance rollover market is made up of about one million individuals with $370 billion in assets. Just 25% of plan participants who performed rollovers of $200,000 or more in mid-2008 rolled all or some of the funds into an account held by existing plan providers, which typically are the mutual fund companies that manage the 401(k) subaccounts. At least, that's according to a study by the Spectrem Group in Chicago.

Instead, 53% rolled over at least part of the balance to companies where they hold other investments and another 39% transferred funds to companies where they had existing IRAs. There is some overlap in these statistics because an IRA may be part of an individual's investment account.

On the 401(k) loan side: Despite the recession, only 18% of all 401(k) participants had outstanding loans according to year-end 2008 data. Steve Blakely, an EBRI spokesperson, estimates that loan activity in 2009 and 2010 is about the same.
Aggregate data, however, appear to camouflage the activity of at least one leading 401(k) provider. In August 2010, Boston-based Fidelity Investments, the nation's number one provider of workplace retirement savings plans, reported that loan and hardship withdrawals were on the rise.

Fidelity administers 17,000 plans, representing 11 million customers. And the average 401(k) account balance is $62,000. "The majority of participants continue to make savings though their work plans a priority," says James M. MacDonald, the president of workplace investment at Fidelity Investments. "However, the current economy has forced some workers to borrow from their 401(k) accounts to pay for critical living expenses, ultimately jeopardizing their future retirements."

MacDonald said in September that loans initiated over the past year grew to 11% of total active participants from about 9% one year earlier. The portion of participants with loans outstanding also increased two full percentage points in the second quarter to 22%. The average loan amount at the end of the second quarter was $8,650, with an average loan duration of three and one-half years.

During the second quarter of this year, 62,000 participants initiated hardship withdrawals, where only 45,000 did in the same period the year before. Hardship withdrawals can only be taken for medical expenses, to buy a primary home, for educational or burial expenses, or to prevent eviction or foreclosure or damage to a home, according to the Internal Revenue Service.

Not all loans are prompted by dire financial situations. The lack of small business loans has led many entrepreneurs to tap their 401(k)s as a way to obtain instant cash flow. The strategy, known as the "Rollovers as Business Startup" (ROBS) works this way: A businessperson creates a Subchapter C corporation, but does not issue stock. The new company sets up a retirement plan. The businessperson then rolls over his or her existing 401(k) into the new corporation. The company then issues stock and transfers the stock to the new retirement plan in exchange for cash. The IRS requires that properly structured plans meet antidiscrimination rules and that stock transferred into the newly created retirement plan be properly valued.

Over 4,000 businesses used ROBS funding last year, according to a study by FRANdata, an Arlington, Va., company that tracks data on franchise businesses. More than 60% of ROBS transactions were used to start franchise businesses. That type of financing, FRANdata says, had an $8 billion impact on the economy in 2009, generating a total 62,000 direct and indirect jobs.

Financial planners say that before one of your clients attempts a rollover as a business start-up, they should have a solid business plan and consult with a tax attorney. Wernette, of Rehmann, says he talked to several clients about this financial strategy, but advised against it because the start-up businesses were too risky.