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Many plan sponsors make plan loans available in the hopes that they will make employees more comfortable about saving. After all, doesn’t it seem more appealing to put away money if you know you retain access to it?

Of course, once loans are made available – and once the same employees take them over and over, using the retirement plan like a savings account – many plan sponsors experience a different hope: that employees will use the plan loan feature less frequently. Although we hesitate to tell a participant “you should take a loan” or “you shouldn’t take a loan”, the best approach is to ensure participants receive clear and full education regarding the implications of plan loans.

Last week CNN Money ran an article detailing four reasons participants should not take plan loans. The linked article might be helpful for human resources professionals who are seeking to become better educated regarding loans and more equipped to answer participants’ questions. In addition, if you receive participant education from advisors at QPA and would like for your participants to receive additional information regarding loans, please let your advisors know. There is an art to providing the necessary amount of education, without providing definitive advice.

Matthew Eickman
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