At first it sounds reasonable: a debit card attached to your 401(k) account. If you need to access your money in an emergency, you simply swipe your card to pay for the expense, withdrawing only the exact amount you need instead of taking out a lump sum.

That’s exactly the pitch from the folks at The Reserve, a company that is taking a lot of heat from outraged members of Congress and over the marketing of its 401(k) debit card. In fact, Sen. Herb Kohl, D-WI, who chairs the Special Committee on Aging, has co-sponsored a bill to outlaw it.

The ability to loan yourself some of the money in your retirement account is perfectly legal. If your plan allows it, the law says you can borrow up to 50% of your balance or $50,000, whichever is less.

The legislation introduced this month would not change this.

What lawmakers object to is the method for tapping your 401(k). Ashley Glacel, spokesperson for the Senate’s Special Committee on Aging, says a debit card “makes it far too easy for people to dip into their retirement savings for casual purposes.”

Lunch. Mocha lattes. The latest electronic toy. Gas for your car. Groceries. A haircut. In other words, relatively small, everyday purchases.

When asked his position on the 401(k) debit card, David Wray, president of the Profit-Sharing 401(k) Council, takes about a pico-second to reply, “We don’t support the practice. The plan loan process in place now works. There’s no need for such a radical change.”

But Bruce Bent, CEO of The Reserve, says all his company is trying to do is bring the 401(k) loan process into the 21st Century.

In general, if you apply for a loan from a 401(k) plan without a debit card arrangement (few do), the plan administrator sells the appropriate amount of investments in your account and issues you a check. Once you deposit this into your bank account, you are free to spend the money anyway you want- including, using a debit card attached to your checking account. Interest earned on the money while it sits in your bank account is, of course, subject to ordinary income tax.

In contrast, Bent points out that with a debit card loan, the amount you borrow is shifted into a money market fund inside your 401(k) account. It stays there until you swipe your card to pay an expense. Any interest earned on assets in the money market account remains tax-deferred.

“Not the point!,” say critics. (Besides, with money market rates around 1-1½ %, how much taxable interest are we really talking about?)

It’s human nature that’s got them worried.

Considering how little most Americans have managed to save for retirement and the record amount of credit card debt we’ve collectively piled up, the concern is that we won’t have the self-restraint to not raid our 401(k)s- because the debit card makes it so easy.

Wray contends that being able to swipe money out of your retirement plan (both literally and figuratively) “would send the message that a 401(k) is about current consumption and that it’s legitimate to use those assets for current consumption.”

Then there’s the issue of re-paying the loan.

Whether you have the standard lump sum variety or swipe the money from your 401(k) using a debit card, federal law requires that you replace the money in your retirement account by making regular payments- at least quarterly. If you fail to do this your plan loan is considered to be in default.

This is a disaster! Instead of being classified as a “loan,” the unpaid balance becomes a “distribution,” which means 1) you own income tax on the amount, plus 2) you get hit with a 10% penalty if you’re under age 59½, and 3) you can never get that money back into your retirement account where it could grow tax-deferred.

In the case of a typical 401(k) loan, your employer makes sure you don’t miss a payment because the amount is automatically deducted from your paycheck. But with a loan taken via a 401(k) debit card, you receive a monthly statement, just as you would with a regular credit or debit card. It’s up to you to send in the money.

Last, but definitely not least, there’s the issue of cost.

To borrow a sum of money from your retirement account, you generally pay a modest, one-time set-up fee of around $25. Although you have to pay interest on the loan, “100% of the interest goes back to your account,” says Wray.

According to Bent, to use the Reserve Solution debit card you pay a set-up fee of $75, plus an annual fee of $25. This goes to the company that administers your 401(k) plan. The interest rate on your loan balance is the prime rate plus 2.9%. Since the prime rate is currently 5%, in today’s market your interest rate would be nearly 8%. And more than a third of that- the full 2.9%- goes into The Reserve’s account- not yours.

“You’re replacing a loan program that is extremely efficient and participant-friendly,” says Wray, “with one that is very expensive.”

With Congress about to leave for summer recess and an election around the corner, its doubtful that legislation making a 401(k) debit card illegal will be enacted this session. But opponents are determined to put an end to the practice. “We think it’s more responsible to create policy that reminds people that taking money out of the 401(k)s is a last resort,” says Glacel.