1. Get to the root of the issue
Educate and reinforce budgeting behaviors all year long.
2. Limit the number of loans available
When plans allow for multiple loans, most loan users have more than one outstanding loan.
3. Know your people
Listen to your employees and evaluate your benefits lineup to ensure you’re providing benefits that workers want.
4. Add a loan waiting period
Waiting periods can help workers break the cycle of back-to-back loans against their accounts.
5. Look inside and outside
In cases of workers’ credit card or medical debt, cross-promote benefits features that you offer, such as credit counseling and health savings accounts.
6. Add low-cost loan options outside the plan
Send the message that the 401(k) plan should be earmarked for retirement by giving access to low cost loan providers that can help pay for emergency bills.
7. Make it more personal
Targeted, timely messaging during the loan transaction process can make the employee pause one last time and consider other options before electing a loan.
8. Allow terminated employees to repay their loan
Two-thirds of plans allow terminated employees to repay their loan and avoid hefty tax penalties.
9. Roll out the welcome mat
Take the opportunity to communicate loan repayment requirements with your newest employees to help them start off on the right financial foot.
10. Reduce the balance eligible for loans
This limits the amount of loan balances and therefore potential leakage from the plan. It also conveys to workers that the employer contribution is for retirement purposes.