Participant loans, when structured thoughtfully, can actually strengthen the overall retirement experience by reducing financial stress for employees. Knowing they can access a portion of their savings when life happens creates a sense of security that often encourages participation rather than discouraging it. For many workers, financial emergencies aren’t abstract — they’re real, immediate, and disruptive. A loan feature can help employees avoid high-interest debt, prevent unnecessary cash-outs, and ease the reluctance some feel about locking money away for decades. When participants view their plan as both a long-term savings vehicle and a responsible short-term safety net, it builds trust, supports ongoing engagement, and promotes healthier financial habits over time.
These themes surfaced at the conclusion of a TPSU program at UC Davis, where Fred Barstein interviewed Veronica, the Director of Human Resources for an organization with roughly 330 employees. Veronica explained why her organization intentionally includes participant loans in its plan design — a decision many employers shy away from. For her workforce, the flexibility to borrow from their own accounts when faced with unexpected expenses is a meaningful benefit.
She noted that the plan allows only one loan at a time, and close coordination with their recordkeeper makes oversight simple and effective. As a result, they’ve seen no evidence of misuse. Veronica also echoed a trend often observed across TPSU programs: participants who take loans rarely stop contributing to their 401(k). Instead, they continue saving consistently, reinforcing the idea that offering a loan option does not inherently undermine long-term retirement readiness — and in some cases, may actually support it.
Read the Full Transcript Here:
Fred: Greetings, this is Fred Barstein, CEO and Founder of TPSU and 401kTV. We’re here on the UC Davis campus where we just completed the TPSU Program, and I’m joined by Veronica. Welcome, Veronica.
Veronica: Thank you.
Fred: Mind if we ask you a few questions?
Veronica: Absolutely.
Fred: Great. Tell our audience a little bit about yourself.
Veronica: Sure. My name is Veronica, and I’m the Director of Human Resources. We employ about 330 people.
Fred: One of the things you mentioned today goes a bit against the grain of what we typically hear: your plan does allow loans — and it’s working for you. Why do you allow loans?
Veronica: We allow participants to take loans so they have flexibility. If they have a financial need they can’t meet through other means, they can access their own funds to address it.
Fred: And how is that working in practice? Are people abusing the feature?
Veronica: Not at all. We only allow one loan at a time, and with support from our recordkeeper, we can monitor activity very easily. We haven’t seen any abuse.
Fred: Something we’ve seen nationally is that removing loan availability can actually discourage people from contributing. Meanwhile, those who do take loans often continue contributing. Has that been your experience?
Veronica: Yes — those who take loans continue contributing.
Fred: So while loans do come with concerns, there can also be real benefits.
Veronica: Absolutely.
Fred: Final question: How was today’s TPSU program? What did you learn, and would you recommend it?
Veronica: I would definitely recommend it. I learned a lot — especially ideas around plan design and potential changes we might consider for our workforce. Overall, it’s a great class, especially if you don’t know much about retirement plans and how they work.
Fred: And that’s most people, right?
Veronica: Absolutely.
Fred: Well, thank you for joining us today — and thank you for attending.
Veronica: Thank you.
Fred: And thank you for watching 401kTV. Stay tuned for more programs like this.
