Improving a company’s 401(k) loan policy is a strategic way to promote both employee financial wellness and long-term retirement readiness. Allowing too many concurrent loans can encourage short-term borrowing at the expense of future savings, gradually eroding account balances and undermining the plan’s purpose. By streamlining loan provisions, companies can steer employees toward healthier financial behaviors while still offering support for true emergencies.
One effective approach is to gradually reduce the number of loans allowed—from more lenient structures, like three loans, down to one—giving employees time to adjust. Clear communication about the rationale behind these changes, especially the long-term benefits of keeping funds invested, helps employees understand that the policy is meant to protect their financial futures, not limit their flexibility.
At a recent TPSU program at the University of San Diego, Fred Barstein, CEO and founder of TPSU and 401KTV, spoke with Georgina, Senior HR Generalist and 401(k) Plan Administrator, and Marlette, Senior VP of Human Resources, about their experience refining their loan policy to better serve their 760-employee company. As the company more than doubled in size over the past decade, the HR team saw a growing need for financial education and more thoughtful plan design.
Working with their plan advisor, they benchmarked industry practices and began reducing the number of allowable loans. Without making a formal announcement, they moved from allowing three loans to just one. The change was met with little resistance—only a few frequent borrowers raised concerns, which were addressed by emphasizing the focus on long-term financial wellness. As Georgina noted, the goal was not administrative ease, but to help employees retire with meaningful savings. The company continues to offer hardship withdrawals to ensure access to funds in true emergencies, maintaining a balance between flexibility and financial discipline.
Read the Full Transcript Here:
Fred Barstein:
Greetings. This is Fred Barstein, CEO and founder of TPSU and 401 KTV. Just completed a program at the University of San Diego on campus and I am here with Georgina and Marlette. I got that right?
Marlette:
Yes.
Fred Barstein:
Very good. Welcome. Okay if we ask you a few questions?
Georgina:
Of course.
Fred Barstein:
Very good. Before we do, tell our audience a little bit about yourself.
Georgina:
Well, my name’s Georgina and I work for a company that has 760 employees.
Fred Barstein:
What’s your role?
Georgina:
I’m the senior HR generalist and also the plan administrator.
Fred Barstein:
Very good.
Marlette:
I’m Marlette. I with the same company with Georgina. Worked with her almost 18 years and I’m the senior VP of Human Resources.
Fred Barstein:
Senior VP. Big shot.
Marlette:
Just don’t tell anybody.
Fred Barstein:
That’s a good title. They say, “One more mistake and we’ll make you a vice president.” So one of the things you talked about, which I really was interested in is simplifying the plan and also how you handled loans. So tell us a little bit about what you did and why you did it and how it’s working.
Georgina:
Well, over the course of the past 10 years, the company’s more than doubled and we’ve seen that we needed to do some training, especially for financial training for team members. And we realized that the 401k loans were misunderstood, the concept. And so we started working with their advisor and trying to figure out what is the norm? What does the industry do? And how can we better help serve our team members?
And part of the discussion was reducing the number of loans because of what they’re missing out when the funds are out on the market. So I think initially I think people were like, oh, you’re just doing it administratively. Realistically, it wasn’t administratively. Realistically, it was for financial wellness, for a team.
Fred Barstein:
To help them.
Georgina:
And to help them understand that this is long term, that retirement is really meant for them to have something in their pockets the day that they decide to retire and can do it and do it freely.
Fred Barstein:
And Marlette, how did your employees react to this?
Marlette:
Actually, we didn’t even publish the fact that we reduced the loans. We actually started with team members being able to have three loans and then we went down to two loans and after maybe four or five years of doing that, we streamlined it even more to one loan. And we didn’t really hear a lot of grumbling about it. Only maybe the top 10 people were constantly taking out loans were the ones that probably were impacted by it, but we explained to them the reasons behind it and we’ve been fine ever since.
Fred Barstein:
And do you have hardship loans or any loan?
Marlette:
Yes, we do.
Fred Barstein:
Yeah. Like a hardship withdrawal?
Marlette:
Yes.
Fred Barstein:
Well, congratulations on that. That is definitely cutting edge and it’s what more and more of us should be doing. Final question for you both. One or two things you learned today, and would you recommend this to other plan sponsors like yourself?
Georgina:
I think it was interesting to know that we are on the right path. We have been doing the auto enrollment and the auto increase, which was recommended in the course. And sometimes you listen to your advisor not really knowing, are they giving you the best advice, but we’ve been doing it for a couple of years now and it really matches some of the information that you provide us in addition to some other things that we’re going to go back and research as well.
Marlette:
Right.
Fred Barstein:
Okay. What other things?
Georgina:
Well, the possibility of a matching and how you can maybe get more participation if you lengthen the matching, even if you kind of adjust the formula. And some other recommendations in regards to the annuity and some nuances that we actually have never heard of. So we learned a lot.
Fred Barstein:
Very good.
Marlette:
We do have an advisor we’ve been with for maybe 10, 12 years now. They do a great job for us, but I am going to do an RFP on them because they don’t do it on their own.
Fred Barstein:
Well, I’d love to help you to do this, so I’m going to hold you to it. It’s always good to check.
Marlette:
Right. Right.
Fred Barstein:
Why not? It doesn’t mean you have to change them.
Marlette:
Right.
Fred Barstein:
Half the time we do the RFPs, the advisor stays if they’re doing a good job, because why change if you don’t have to on that. So anyway, thank you so much for your time.
Georgina:
You’re welcome.
Marlette:
Well thank you.
Fred Barstein:
And thank you for watching 401 KTV. Please stay tuned.
Marlette:
Bye.
