Does your company charge participants an administrative fee for loans?

[Guest Tammie Palchanes]

My company is considering the possibility of charging an administrative fee to participants who take a loan. I'd like to see what typicial practise, or if you have knowledge of what other companies are doing (i.e., Does your company currently charge a fee for loans, if so, what's the cost per loan? Is the fee taken from the proceeds of the loan or do participants pay via check?) Any information would be helpful. Thanks.

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[Guest]

It is standard practice for benefits administration firms to charge a fee for loan administration. Typically, there is an initial loan setup fee and then an ongoing annual administration fee per loan. The loan fees are typically charged to the participant and taken directly from the participant's account.

I've seen initial loan fees range from $50-$150 and the annual fees from $25 to $75.

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Carol J. Ringwald

Senior Vice President

Shawmut Consulting Assoc.

[KIP KRAUS]

TAMMIE:

We charge our employees the initial loan fee and the annual loan maintenance fee. We are with Vanguard. The loan initiation fee is $35 and the annual loan maintenance fee is $20.

I agree with Carol. It has been my experience that employers charge these fees to plan participants.

I have also managed plans that charge the initiation fees to participants and the company pays the annual maintenince fees.

[Alf]

We charge a $75 set-up fee and $50 a year service fee. These are set at a pretty high level to help disuade participants from taking loans of small amounts.

[rcline46]

We have charged loan fees forever on initiation, do not yet charge annual fees. Taken from proceeds of loan.