401k loansQ: Hey Erick, we are considering a plan design change regarding loans. Are there any data that supports offering just one loan per participant versus offering multiple loan options?

A: According to T. Rowe Price’s 2022 “Reference Point”, plans that allow multiple loans tend to have lower savings rates — dropping from an average deferral of 7.9% to 6.8%. Allowing a greater number of loans is also correlated with higher average loan balances: $10,162 for one loan, $12,424 for two loans, and $13,698 for three or more loans. The study suggests that given the negative potential impact that allowing multiple loans has on savings, plan sponsors could consider limiting them to one per participant. This solution could satisfy the participant need while also limiting the possibility of loans being used for less essential reasons, preserving important retirement savings. You can access the report .

Retirement Partners Can Help

Get a plan to help improve your 401k results.

Isn't it time to review your 401(k) Plan?

Disclosures, Sources, and Footnotes

Approval RP-798-0822 Tracking #1-05315528

For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.