Importance

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Abstract

An employee eligible to participate in a pension plan is loaned up to the full employee contribution to the plan, thereby encouraging participation in the pension plan. This 'Participation Loan' includes periodic payments to the employee until employment ceases, the employee retires, or the loan terminates. Data on the Loan, the pension plan assets, the employer, and the employee is kept by the lender. The employee must provide current information to the lender to prevent termination of the loan, at which point the loaned amount, plus interest, is due. Failure to provide current information causes an alarm that can lead to termination of the Loan. At termination, the loaned amount, plus interest, is preferably re-paid in a single payment. The Participation Loan can be secured or unsecured. The secured variant can use traditional assets for collateral or an existing balance in the defined contribution pension.

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First Claim