Question

Which of the following statements regarding loans from 401(k) plans is NOT correct?

A)They must bear a reasonable rate of interest.
B)They must be made in accordance with the loan provisions stipulated in the 401(k) plan.
C)They must be adequately secured.
D)They must be made available to highly compensated employees in amounts greater than that made available to other employees.

Answer 1

The correct statement regarding loans from 401(k) plans is that they must be made available to highly compensated employees in amounts greater than that made available to other employees. This statement is false.

Step-by-step explanation:

The correct statement regarding loans from 401(k) plans is D) They must be made available to highly compensated employees in amounts greater than that made available to other employees. This statement is not correct because loans from 401(k) plans must be made available to all employees on equal terms.

The Employee Retirement Income Security Act (ERISA) prohibits discrimination in retirement plans based on an employee's compensation level. Therefore, loans from 401(k) plans cannot favor highly compensated employees over other employees.