Can the Employer limit the assets available for a loan to elective deferrals only?

[katieinny]

An employer wants to amend his current loan program to say that the only funds available for a loan are elective deferrals. In some cases, that will severely limit the amount a participant can take. I can picture a scenario where, according to the usual loan calculations, a participant could borrow $20,000, but only has $10,000 in elective deferrals. If there are other vested assets, is the employer required to make them available for a loan, too? I understand that an employer can specify the order of assets that will be loaned first, making the elective deferrals the first source of funds. But saying that all vested assets aren't available seems like half a loan program.

[PensionPro]

The plan may limit the sources from which loans can made. Remember as per Code Section 4975(d)(1), loans should be available to all participants or beneficiaries on a reasonably equivalent basis.

[Bird]

Can the Employer limit the assets available for a loan to elective deferrals only?

Absolutely. Employers often don't want employer money available for loans, but don't care what employees do with "their own" money, typically deferrals and rollovers.