Loan from salary deferral contributions only

[Guest Factster]

Is it possible to have a loan policy that allows a loan to be made only from the employee 401(k) salary deferral contributions? The majority I have seen seem to be have a generic statement of "from the vested account balance". If this is okay, then is it possible to restrict loans to certain investment options?

[Medusa]

I have seen plenty of loan policies that have these restrictions. Usually the statutory limits are cited, with the additional stipulation that (for example) the amount of the loan will not exceed the deferral account balance.

We have seen the limits on investments where illiquid investments were involved. So the policy might cite the statutory limits, not to exceed the portion of the deferral account balance invested in mutual funds.

You would need to be careful that this is not a discriminatory policy in operation, but it is not likely to be.