A new report claims that employees are less likely to take a loan from their 401(k) account if their company also offers an employee stock purchase plan (ESPP).
The report by Fidelity Investments also states that employees with access to both an ESPP and a 401(k) tend to borrow a smaller amount from their 401(k) and to have a lower outstanding loan amount.
The research analyzed Fidelity clients offering both an ESPP and a 401(k), and companies that only offer a 401(k). Fidelity notes that while the impact of ESPPs on 401(k) loans was evident in companies of all sizes, the difference was notable in small companies (less than 500 employees), where only 9% of workers took out new 401(k) loans when an ESPP was also available, compared with 14% for employers that only offered a 401(k).
The outstanding loan rate at small companies was also significantly lower, with only 14% of ESPP/401(k) workers having an outstanding 401(k) loan balance, compared with 23% of employees at 401(k)-only companies.
Employees at large companies (more than 10,000 employees) with both an ESPP and 401(k) borrowed an average of $2,000 less than employees with only a 401(k), and had an average outstanding loan balance of $3,000 less than employees without access to an ESPP.
Of course, correlation does not necessarily imply causation, and the release tells us nothing about the relative income levels, living circumstances, etc. — factors that could well influence the dynamics reported here.
