Question

Which of the following statements concerning participant loans from qualified plans is correct?

Group of answer choices

Loans frequently are secured by using a participant's account balance as collateral.

Loans can be limited only to the owners of the company in a cross-tested Profit Sharing Plan.

Non-highly compensated employees are typically charged below-market interest rates.

A qualified plan is required to include a loan provision in one form or another.

Answer 1

The main features of participant loans from qualified plans of retirement are enumerated as below:

· It is mostly secured by the account balance of participants as security;

· It may or may not contain a loan provision;

· It needs to charge market interest rate;

· The benefits of a loan program should be uniformly available to all the participants.

Considering the above points, it can be said that the first option is correct i.e. “loans frequently are secured by using a participant's account balance as collateral”.