Participants’ 401(k) loan activity in 2013 was little-changed from year-end 2012 — but it remained noticeably higher than before the Great Recession, according to a new report.
At year-end 2013, 21% of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, the same as in the prior four years, according to a report by the Employee Benefit Research Institute (EBRI). However, that was up from 18% at year-end 2008.
In the 18 years that the EBRI/ICI database has been tracking loan activity among 401(k) plan participants, there has been little variation. From 1996 through 2008, on average, less than one-fifth of 401(k) participants with access to loans had loans outstanding. However, at year-end 2009, the percentage of participants who were offered loans with loans outstanding ticked up to 21% and remained at that level from year-end 2010 through year-end 2013.
On average, over the past 18 years, among participants with loans outstanding, about 14% of the remaining account balance remained unpaid.
However, the EBRI analysis noted that overall, loans from 401(k) plans tended to be small, with a sizable majority of 401(k) participants in all age groups having no loan outstanding at all. For example, 88% of participants in their 20s, 73% of participants in their 40s and 86% of participants in their 60s had no loans outstanding at year-end 2013.
Additionally, not all participants have access to 401(k) plan loans — factoring in all 401(k) participants with and without loan access in the database, only 18% had loans outstanding at year-end 2013.
In the 2013 EBRI/ICI 401(k) database, 87% of participants were in plans offering loans. Loan activity varies with age, tenure, account balance and salary. Of those participants in plans offering loans, the highest percentages of participants with outstanding loan balances were among participants in their 30s, 40s or 50s. In addition, participants with five or fewer years of tenure or more than 30 years of tenure were less likely to use the loan provision than other participants.
Fourteen percent of participants with account balances of less than $10,000 had loans outstanding.
Among participants with outstanding 401(k) loans at the end of 2013, the average unpaid balance was $7,421, compared with $7,153 in the year-end 2012 database. The median loan balance outstanding was $3,973 at year-end 2013, compared with $3,858 in the year-end 2012 database. Nevertheless, the ratio of the loan outstanding to the remaining account balance decreased slightly, from 13% at year-end 2012 to 12% at year-end 2013.
