United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office Health, Education, and Human Services Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1997-10-01 monographic deposited born digital 36 p. GA 1.13:HEHS-98-5 https://www.govinfo.gov/app/details/GAOREPORTS-HEHS-98-5 P0b002ee18039e7d6 f:he98005 DGPO 2010-08-12 2011-05-04 GAOREPORTS-HEHS-98-5 machine generated eng fdlp REPORT GAOREPORTS-HEHS-98-5 HEHS-98-5 Retirement pensions Employee retirement plans Tax law Employee benefit plans Disadvantaged persons Loans Loan interest rates Social security benefits Blacks Hispanics Social Security Program Letter Report HEHS Pursuant to a congressional request, GAO: (1) determined the effects of pension-plan borrowing on participation in and contributions to 401(k) pension plans; (2) described the demographic and economic characteristics of workers who borrow from their pension accounts; and (3) identified the potential consequences for participants who borrow from their pension accounts.<p/>GAO found that: (1) plans that allow borrowing have a somewhat higher proportion of employees participating than other plans, all other factors being equal; (2) in addition to employer matching, allowing borrowing increases participation among eligible employees, especially lower-income employees; (3) allowing pension-plan borrowing also significantly affects how much employees contribute; (4) participants in plans that allow borrowing contribute, on average, 35 percent more to their pension accounts than participants in plans that do not allow borrowing; (5) based on individual financial data GAO examined, relatively few plan participants--less than 8 percent--have one or more loans from their pension accounts; (6) this is true for a point in time and would not include those who had repaid a past loan or who might borrow in the future; (7) blacks and hispanics, lower-income individuals, participants who have recently been turned down for a loan, and workers who also are covered by other pension plans are more likely to borrow from their pension account than other participants; (8) plan borrowers, on average, have fewer assets than nonborrowers and have more nonhousing debt relative to income than nonborrowers; (9) while borrowing provisions may reduce retirement income, they also can encourage workers to save for their retirement; (10) loan provisions of many pension plans provide for repaying the loan at favorable interest rates, which may be lower than the investment yield that could have been earned had the money been left in the pension account; (11) consequently, the borrower will have a smaller pension balance at retirement, since the interest paid to the account is less than what the account balance could have earned form investing in equities; however, other potential effects of borrowing could outweigh these disadvantages; (12) if loan provisions influenced the employee's decision to participate in the pension plan, the employee's retirement income would likely have been even less had there not been such provisions; (13) allowing participants to borrow from their defined-contribution pension plan, therefore, may be a double-edged sword; and (13) there are both advantages and disadvantages to borrowing from other voluntary retirement savings accounts, such as individual retirement accounts, however, few of the positive effects of pension-plan borrowing would be realized in mandatory retirement programs like Social Security. https://www.govinfo.gov/content/pkg/GAOREPORTS-HEHS-98-5/html/GAOREPORTS-HEHS-98-5.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-HEHS-98-5/pdf/GAOREPORTS-HEHS-98-5.pdf GAO/HEHS-98-5 https://www.govinfo.gov/app/details/GAOREPORTS-HEHS-98-5 Letter Report GAO/HEHS-98-5; 401(k) Pension Plans: Loan Provisions Enhance Participation but May Affect Income Security for Some; Retirement pensions Employee retirement plans Tax law Employee benefit plans Disadvantaged persons Loans Loan interest rates Social security benefits Blacks Hispanics Social Security Program