Amending a 401k plan to allow for borrowing

[Guest Carl C]

Our small company (less than 20 employees) administers our own 401k plan. The original provisions of the plan did not allow for participants to take a loan or borrow from their account. We are now considering changing this to allow for borrowing.

Could this be done by just amending the original plan?

Carl C.

[401king]

It can be done by amending the plan and providing the participants a summary of material modifications informing them that the loan is available.

[Kevin C]

Depending on the plan document language, you may also need a written loan program listing the plan's rules for loans.

[JanetM]

You should also consider setting a minimum loan amout, reasonable interest rate, and possible loan administration fee. What you don't want is the trouble and expense of someone borrowing $250 with 48 month repayment schedule.

[austin3515]

I think you should consider hiring a TPA. No offense (believe me) is intended, but anyone who doesn't know the answeers your very basic question should not be doing this on their own. It's a recipe for disaster, big time.

By the way, who's restating your document for EGTRRA? Who's amending it for PPA? Let me guess, you have no idea what I'm talking about, right?

I'm sure you are excellent at your given trade, but it's not worth doing this on your own to save $1,500 a year...