Avi Bernstein, Senior Counsel in the Employment, Labor & Workforce Management practice, in the firm’s New York office, authored an article in the Bloomberg Tax Compensation Planning Journal, titled “Retirement Savings vs. Emergency Savings: The Dual (and Competing?) Uses of 401(k) Plan Assets.”
Following is an excerpt (see below to download the full version in PDF format):
401(k) plan assets represent a significant portion of America’s retirement savings. Per the Investment Company Institute, as of June 30, 2021, 401(k) plans held an estimated $7.3 trillion in assets, which represented nearly one-fifth of the $37.2 trillion U.S. retirement market. But unlike traditional pension plans, 401(k) plans, no matter how big a portion of the country’s retirement savings they represent, are not exclusively retirement savings. Congress recognized that 401(k) plan assets sometimes have to be accessed prior to retirement. The Internal Revenue Code (“Code”) contains various provisions, including amendments by the recently passed SECURE Act 2.0 of 2022, reflecting attempts to balance the competing needs of preserving savings for retirement versus making them available to address certain life circumstances, such as may be of high interest to participants as well plan administrators and employers.