Second Quarter 401(k) Plan Loan Interest Rate Holds at 4.25%
Your employees should consider the cons and pros of these loans.
The interest rate for loans taken from the 401(k) Pension Plan will remain 4.25% during the second quarter of 2014.
The prime interest rate remains 3.25%. The 401(k) Plan’s loan interest rate is set at 1% more than the nation’s prime interest rate.
Things you and your employees should consider about loans
If your co-op offers a 401(k) Plan loan option, your employees are eligible to take loans. You should encourage them to contact you for details on your co-op’s loan program. It’s important that participants seeking loans from their 401(k) Plan accounts understand the cons as well as the pros of these loans.
Cons:
- By taking a loan from your 401(k) Plan, you lose the benefit of pre-tax investing because repayments can only be made with after-tax dollars
- If you stop contributing to your 401(k) Plan due to the demands of making a loan repayment, your employer’s matching contributions also will stop
- If you leave your job, you must repay your loan within 90 days or face taxes and possible penalties
- Interest on 401(k) Plan loans isn’t tax deductible
Pros:
- No credit check
- Competitive interest rate
- Automatic payroll deduction for repayments
- Loans can be taken for any reason
When considering a loan, participants should seek guidance from a financial or tax advisor. They also can contact NRECA’s Personal Investment & Retirement Consulting (PIRC) team at 1.866.673.2299, option 5, then 2, or at pirc@nreca.coop.
Modeling loans online
To view the rate and request a loan, participants can log in to the Employee Benefits website and go to My Retirement > Manage Your 401(k) Account > Loans > Model and Request a Loan.
Where to send loan documents
Send loan documents to:
NRECA
Attn: Retirement Plan Distributions Unit
P.O. Box 6127
Lincoln, NE 68506
For questions, contact the Member Contact Center at 1.866.673.2299 or contactcenter@nreca.coop.