Offer plan loans? Be sure to set a reasonable interest rate

Posted by Kim Chen on June 21st, 2017

Can your company’s retirement plan participants take out loans from their accounts? If so, you must set a “reasonable” interest rate. Neither the IRS nor the DOL provides a set percentage for plan sponsors. The IRS looks to similar local interest rates and what local banks charge for similarly structured loans. Meanwhile, DOL regulations generally define a reasonable rate as equal to commercial lending interest rates under similar circumstances. Need help? We can assist you in reviewing your plan document and loan policy statement to calculate a reasonable rate.