The wisdom of offering 401(k) loans has long been debated, with some arguing that allowing them is an incentive for employees to participate in the plan, while others believe they do more harm than good since employees often reduce or stop saving in their 401(k) plan after taking a loan from it.
The majority (87.8%) of 401(k) plans do permit loans, according to the Plan Sponsor Council of Americas 56th Annual Survey of Profit Sharing and 401(k) Plans. Nearly 40% of plans, meanwhile, permit up to two loans.
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