I'm curious how many banks have arranged for their employees to obtain 401K plan loans?

Ours does - $520 million bank with about 220 employees, 11 branches, one loan center, and an affiliate insurance agency.

(Edited) Putnam manages the plan, FYI.

Our bank does not allow them. I'm not sure how many employees we have, but we're in 7 states with well over 200 branches.

Current bank does not, but the previous one (large, 'nation-wide' bank) did. The bank I worked for that was purchased by 'nation-wide' did as well.

We have allowed since plan inception, 2 banks with 11 branches. We limit the terms and % of "vested" balance available for loan by purpose.

Our bank allows bank employees who participate in the bank sponsored 401(k) plan to borrow from their participant balances.

Our bank also has a trust division that administers the plan along with many many other employer sponsored employee benefit plans, most of which are 401(k) plans. The permissibility of plan loans is an opinion that is determined plan by plan and most employers that we deal with permit plan loans.

Of course, all of the plan loans must conform to ERISA requirements regarding the amount of the loan, the loan term, the interest rate, and the repayment schedule. And of course if a plan makes more than 25 loans to its participants in a calendar year, Reg Z will also apply.

Quote:

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if a plan makes more than 25 loans to its participants in a calendar year, Reg Z will also apply.

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The threshhold drops to 5 per year for dwelling secured loans.

Richard, you are right. I just didn't include that part because I rarely see any 401(k) participant loans that are actually secured by residential property. I think that in 8 years and thousands of loans, I have only seen one that was actually secured with residential RE. The purpose of many 401(k) participant loans I test are frequently for or to generate additional funds to make a down payment or cover closing costs. My guess is that the loan limit of 50% of the participant's contribution balance but not in excess of $50,000 imposed by ERISA makes the process of the 401(k) route that much less appealing.

If the loan IS residentially secured, does the IRS still let the borrower deduct the interest? It hardly seems the employee's home is really at risk when s/he's borrowing her/his own money.

Our bank, 1300 employees, allows a loan on a 401(k) for home loans, education, and medical expenses. The employee can only borrow up to 50% of the balance in the account.

Richard,

If the 401(k) participant loan were secured by the residential property don't know if the interest is deductible. I wouldn't think so. You are borrowing pre-tax dollars but repaying the loan (albeit to yourself) with after-tax dollars. If you were permitted to deduct the interest expense wouldn't you actually be getting a double tax benefit on those same dollars?

I don't know. Sounds like a question for a personal tax expert/professional and outside of my realm of expertise.

We make them..8 billion dollar bank, 150 or so branches in 6 states..We offer 1 rate for home purchases, and a slightly higher (.25) for personal loans. Max of 50% of 401k balance, with a minimum loan of $1000. No more than 2 loans per employee at a time. In addition, the minimum payment is deducted from each paycheck automatically. This is a great benefit to employees, especially since most other employers offer this too.