Topic Thread

Seeking advise on retirement plan loans

  • 1.  Seeking advise on retirement plan loans

    Posted 07-10-2018 13:25

    Looking for advice from other Contractors that allow participant loans from Prevailing Wage Fringe Benefit retirement plans:


    • Do you administer the loan applications and paperwork, or does the employee go directly to a fringe benefit administrator?
    • How are the loan repayments handled – through payroll deductions or directly between the employee and the plan?
    • Is there a retirement plan and/or third party with an approved program that you would highly recommend?



    Lee Ann Riddlemoser

    Accounting Manager


    TEI Final Updated Logo_022117 (002)-use this one

    Main: 4840 Winchester Blvd · Frederick, MD  21703

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    (P) 301-874-4630  ext 123 · (F) 301-874-4634

    (C) 301-991-5946 * (Direct) 301-363-9264


  • 2.  RE: Seeking advise on retirement plan loans

    Posted 07-11-2018 10:12
    ​Hi Lee,

    The company I work for has a 401k program set up with Prudential in which if an employee wants a loan, they log into their portal and do the request including how much and a repayment amount/plan. I then get a notification to approve or deny and I go in to make sure they have enough vested funds to fund the loan and approve or deny based on that. Once the funds have been disbursed via check to the employee we begin to withhold the funds from their paycheck and send it back to Prudential weekly as we run our 401k through payroll. It is a very easy system and great process.

    Krystal Amos
    Miles Resources, LLC
    Puyallup WA

  • 3.  RE: Seeking advise on retirement plan loans

    Posted 07-11-2018 11:39
    Hi Lee,

    - The Retirement Plan document/loan policy dictates if loans can be taken out and what thresholds apply to those loans.  Majority of the Companies ask employees to go directly to TPA and submit loan application on their website.  However, there are some companies that want to control that process and ask employees to submit loan applications to HR or Plan administrator, who then approves those loans.
    - Loan repayments are handled through payroll deductions, which are then sent to TPA along with deferral and match payments for that payroll run.
    - Fidelity, Principal, Prudential, and Mass Mutual are some of the prominent ones out there.

    Zee Malik CCIFP, CPA
    Audit Director
    Katz, Sapper & Miller, LLP
    Indianapolis IN
    (317) 452-1040

  • 4.  RE: Seeking advise on retirement plan loans

    Posted 07-11-2018 17:03

    Hi Lee Ann,

    My company manages approximately 80 prevailing wage retirement and health & welfare plans.

    Regarding loans, different administrators will offer different types of processes for the management of loans.  Usually there is no reason loans can't be handled between the administrator and the employee.

    I highly recommend that loan repayments be made through payroll deductions.  Otherwise, you will likely end up with a huge amount of unpaid loans with creates other administrative and compliance issues.

    We typically advise against offering loans to our prevailing wage clients because they become like an ATM.  If you do want to offer loans, I would recommend limiting them to only one outstanding loan at a time.

    Let me know if you have any other questions or if I can help you in any way.  Good luck.

    Jeff Bennett

    Jeffrey Bennett MBA
    Albany NY
    (518) 362-2119

  • 5.  RE: Seeking advise on retirement plan loans

    Posted 07-12-2018 10:42
    Also keep i mind as a fiduciary of the 401(k) plan you have responsibilities to all participants and a loan to an employee is an investment of the 401(k). If you were to loan funds to an employee that you expected would not be able to repay the funds then you may run into trouble with ERISA.

    Rob McGill
    Senior Manager Tax and Finance
    Bigge Crane