No 401(k) Credit Cards?

Financial institutions such as BancOne are moving to launch 401(k) credit cards-if, that is, they can overcome several obstacles: the IRS, the Department of Labor, and Congress.

The bank's repeated plans to launch a Visa card allowing people to borrow from their 401(k) retirement accounts is on hold, say officials of Columbus, OH-based BancOne. "We requested an IRS private letter ruling a year ago, but it's not been received," says a BancOne spokesman. The bank received a non-committal Department of Labor ruling on its plan last June. "We're waiting to see what happens on the Hill," he says.

Congress is considering H.R. 83, an omnibus pension reform bill sponsored by Congressman Charles E. Schumer (D-NY) that includes provisions which effectively ban 401(k) cards. When BancOne announced its plans last year, Schumer introduced two bills with similar provisions.

Schumer's office says it's unsure when H.R. 83 will be taken up by Congress and acknowledges that anything could happen to the 401(k) card provisions. "There's no doubt in our minds that the 401(k) Visa card proposals are against the spirit of the enabling legislation," says Mark Jeskoviac, Schumer's banking legislation assistant.

Even if BancOne abandons its 401(k) Visa plans, the idea is likely to live on. Coordinated Data Services, a Houston-based company, has also applied for a Department of Labor ruling on its plans for a similar program, and an informal inquiry was received by the Department of Labor last year.

-Andrew.Reinbach tfn.com