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Can I Take A Loan from My Qualified Plan?
The answer to this question can be found in your Plan document.
A loan is not a required plan provision and therefore, the decision on whether to allow loans in a plan is made by the Plan Sponsor, who is typically the employer.
As with any provision, there are pros and cons to allowing loans in a qualified plan. The upside is that a loan enables the participants to draw upon their accounts while still employed. In addition, it is customary in Defined Contribution type plans that the participants pay themselves back the interest portion of the loan.
The downside to allowing loans is that, without careful monitoring and without enforcing some limitations, the purpose of the plan could be defeated. A qualified plan should be geared for retirement income. Loans can provide a temptation to a participant to use the Plan as a lending vehicle.
To find out if your Plan allows loans, refer to your Plan Document.