The answer depends on whether the employer has elected to incorporate a loan provision into the plan. If they have, then you are eligible to apply for a loan. If they have not elected to incorporate a loan provision, then loans are not allowed from the plan.

A participant loan is a plan feature that allows plan participants to borrow against their vested account balance. Obviously, as its name implies, the amount borrowed must be repaid to the plan, which is usually required through payroll deductions on an after-tax basis. Typically the interest charged for the loan is repaid to your account, however, this is not always the case. Check with your plan’s Plan Administrator for details.

Generally, although you may be eligible to apply for a loan, whether you are approved is a Trustee decision. The Trustee will review each application on a nondiscriminatory basis, but will be judged on the applicant’s credit worthiness, purpose of the loan and its term. Generally, participant loans may not exceed a 5-year term and can not be in amount greater than 50% of the participant’s vested account balance or $50,000.

Plan Trustee(s) may also restrict participant loans to certain reasons such as preventing foreclosure of the participant’s principal residence or for the acquisition of a principal residence, among others. There may also be a minimum loan amount imposed such as $1,000 and a one loan outstanding limit.

Please check with your plan’s Plan Administrator or your Summary Plan Description to see if your plan allows participant loans. If so, you can view and print a Loan Application and the plan’s Loan Procedures which detail the allowable circumstances for a participant loan to be granted, interest rate to be charged, etc. from the FORMS section of our website. You will need to obtain the Client Identification number from your Plan Administrator in order to access these items and may also need to download a free copy of Adobe Acrobat Reader software to view and print these forms. A link to the Adobe website is available in the FORMS section for your convenience.