A plan participant asked if she could take money out of her 401k account. I explained the concept of an in-service distribution, but pointed out the the plan did not allow such. Further, I explained why the plan sponsor is not likely to amend the plan to accomodate her request. I then explained the loan process. At the mention of the word' interest', she stopped me to say that paying or charging interest violates the tenets of her Islamic faith.

On further discussion with her Imam, I discovered that the circumstances surrounding the need for a loan may allow for the payment of interest, but was given the impression that the need as stated by the employee is not considered dire enough.

My question: May a participant take a no-interest loan?

Jim Glose
716-510-0591
Buffalo, New York
jim@pswny.com

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