Your plan design may be making it easier for employees to delay retirement

As a plan sponsor, it's usually in your company's interest for your employees to be retirement ready. You know this and act on it in the form of your company-sponsored retirement plan. But, poor financial culture and plan design can leave you and your co-workers in a lurch. There's no better example of this than the retirement plan loan. 

If your plan design does not allow for plan loans, pat yourself on the back and visit www.oneamerica.com/today to discover resources that will help you communicate to your employees about a variety of retirement and personal finance topics. 

If your plan design enables participants to take out loans, read on.  Generally speaking, a majority of loans occur when a person's financial past (debt) creeps back into their present-day life or a proper emergency fund doesn't exist and an emergency occurs. In both cases, an influx of money is desired, but the future is not the place to find the money.

Participants should also know that if they leave their current job, their plan loan will become payable immediately. This means that if they can't pay the loan back immediately, they will owe taxes on it, because their loan will be classified as a non-qualified withdrawal. And don't forget the 10 percent penalty they will owe if they are younger than 59 1/2. If they leave their job for any reason, their outstanding loan may become one of the biggest financial challenges they've ever faced.

You can learn a great deal about your company's financial culture by examining the number of participants with plan loans. A high number of plan loans indicates major financial wellness issues within your organization.

We've pulled together some resources you can use to educate your participants about plan loans and the consequences those loans may have on their financial future. The plan sponsor guide will give you all the information you need to distribute the materials. If you would like more information about changing your plan design to eliminate loans, contact your OneAmerica representative.

• Plan Sponsor Guide
• Loan Infographic
• Loan Considerations Datasheet
• Pete the Planner Video: Downside of Loans
• Pete the Planner Video: Loans and Homes
• Pete the Planner Podcast: Loans and Hardship Withdrawals