PLANADVISER - March/April 2021 - 31

director of retirement at consultants Willis Towers Watson
in Philadelphia. " And in the days before repayment through
payroll, people paid by check. That was a real disaster.
" Those sponsors whose plans do offer loan provisions are
probably envious of the few who don't, " he adds.
Loan Impact Over a Lifetime
" Many of us won't have enough saved for retirement to begin
with, let alone if we're borrowing and taking money from it
prior to retirement, " says Greenleaf. " So those sponsors [that
don't allow loans] are protecting the benefit, which really is
what ERISA tells us we have to do. "
The impact of a loan on a final balance can be striking.
Principal Retirement and Income Solutions in Des Moines,
Iowa, provides participants with a slate of educational materials
on loans, including a simulation showing that a $5,000,
five-year, 5% loan against a $20,000 balance early in one's
working years can reduce the final account balance by over
20%. " There's a difference in what might be earned in the
market versus the rate of interest the participant pays on
the loan, " says Renee Schaaf, head of the Principal operation.
" But, not infrequently, people reduce their contributions, and
they have to pay loan fees. All of those things create a big
impact over a lifetime. "
" That's not to mention double taxation, " says Kylee Bruno,
director of retirement plan consulting and wealth management
at StoneStreet Renaissance (SS/RBA), a member firm
of GRP Financial and Hub International, in Pearl River, New
York. " The employee repays the loan with after-tax dollars,
and, when he takes it out in retirement, he'll pay taxes again. "
All of that said, " When a person runs across a hardship
where he may lose his home, or college tuition is much more
than he'd planned, I do think hardship withdrawals have a
place in the financial wellness ecosystem, " Greenleaf says.
Moreover, the presence of a loan feature can be a plus for
encouraging participation and contributions, says Gilliane
Isabelle, chief distribution officer for AIG Retirement
Services, in Houston. " When someone is debating whether
he wants to enroll, sometimes the loan feature is a security
blanket, and knowing he can borrow might allow him
to save a little more. "
" But loan and withdrawal features are the genie in the
bottle-once they're out, you are not going to take them
away, " says Levinson. As a result, the adviser must navigate
them with his clients as best he can.
One strategy is convincing them to limit loan access.
Bruno recalls a client with a 403(b) plan that allowed five
loans at once. " We talked it down to two, but we're going to
planadviser.com March-April 2021 | 31

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PLANADVISER - March/April 2021

Table of Contents for the Digital Edition of PLANADVISER - March/April 2021

A Season for Change
Through the Ages
Overcoming Obstacles
A Plan Feature Run Wild
Not Just Retirement Services
Take It Past the Limit
Lifetime Income Illustrations
Wanna Be a PPP?
PLANADVISER - March/April 2021 - Cover1
PLANADVISER - March/April 2021 - Cover2
PLANADVISER - March/April 2021 - 1
PLANADVISER - March/April 2021 - 2
PLANADVISER - March/April 2021 - 3
PLANADVISER - March/April 2021 - 4
PLANADVISER - March/April 2021 - 5
PLANADVISER - March/April 2021 - 6
PLANADVISER - March/April 2021 - 7
PLANADVISER - March/April 2021 - 8
PLANADVISER - March/April 2021 - 9
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PLANADVISER - March/April 2021 - 11
PLANADVISER - March/April 2021 - 12
PLANADVISER - March/April 2021 - 13
PLANADVISER - March/April 2021 - 14
PLANADVISER - March/April 2021 - 15
PLANADVISER - March/April 2021 - A Season for Change
PLANADVISER - March/April 2021 - 17
PLANADVISER - March/April 2021 - 18
PLANADVISER - March/April 2021 - 19
PLANADVISER - March/April 2021 - Through the Ages
PLANADVISER - March/April 2021 - 21
PLANADVISER - March/April 2021 - 22
PLANADVISER - March/April 2021 - 23
PLANADVISER - March/April 2021 - 24
PLANADVISER - March/April 2021 - 25
PLANADVISER - March/April 2021 - Overcoming Obstacles
PLANADVISER - March/April 2021 - 27
PLANADVISER - March/April 2021 - 28
PLANADVISER - March/April 2021 - 29
PLANADVISER - March/April 2021 - A Plan Feature Run Wild
PLANADVISER - March/April 2021 - 31
PLANADVISER - March/April 2021 - 32
PLANADVISER - March/April 2021 - 33
PLANADVISER - March/April 2021 - Not Just Retirement Services
PLANADVISER - March/April 2021 - 35
PLANADVISER - March/April 2021 - Take It Past the Limit
PLANADVISER - March/April 2021 - 37
PLANADVISER - March/April 2021 - Lifetime Income Illustrations
PLANADVISER - March/April 2021 - Wanna Be a PPP?
PLANADVISER - March/April 2021 - 40
PLANADVISER - March/April 2021 - Cover3
PLANADVISER - March/April 2021 - Cover4
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