Loans

The average participant loan balance increased from $7,522 in 2009 to $7,677 in 2010. Within the T. Rowe Price book of business, 86% of plans offer a loan provision and 26% of participants have an outstanding loan balance.

The unstable economy probably contributed to the 2% increase in loans during 2010. While participants may see loans as a convenient source of cash, they should be aware of the negative impact on their savings. Loans that are not repaid can cause future tax consequences, and assets taken as loans lose the potential for taxdeferred growth until they are repaid.

Looking Forward

Any continued economic instability may result in additional loan requests. Sponsors should carefully monitor loan activity and consider special communications and loan education if there is concern about participant behavior.

Get more information on this topic along with supporting charts by viewing the full report.

 

 

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Key Findings

  • 86% of T. Rowe Price clients offer loans to participants
  • Health Care and Social Assistance companies are the least likely to have a loan provision as part of their plan design
  • Management of Companies plans have the highest incidence of loan activity, with 36.1% of participants having a current loan balance
  • Participants in Public Administration have the highest average loan balance at $12,372