Plan Advisor, December 1, 2008

Janet Aschkenasy reports in the kinds of questions plan sponsors and advisers need to address if they’re going to free participants of the notion that a plan loan or hardship withdrawal is the best place to turn for the extra cash many so sorely need in the current financial environment.

Plan sponsors and advisers have to make employees understand the economics of what happens to their retirement account when a hardship withdrawal or loan is taken. Participants have to understand, says Beth Almeida, executive of the National Institute on Retirement Security in Washington, that “even a fairly modest amount can have a really significant effect because of the loss of compound interest.”

“It’s almost like a truth-in-lending disclosure [that’s required],” says Almeida. “Something saying: ‘Here is basically what you’ll pay over time.’”

Read the full article here .