Certified Plan Sponsor Professional (CPSP) Practice Exam

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Prepare for the Certified Plan Sponsor Professional Exam. Use flashcards and multiple choice questions with full explanations. Achieve exam success!

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Do the majority of 401(k) plans allow participants to take loans from their 401(k) accounts?

Yes
No
Only in some plans
Only for hardship reasons

The correct answer is: Yes

The majority of 401(k) plans do allow participants to take loans from their accounts, making this the correct choice. Many employers choose to include a loan option as part of their 401(k) plan to provide employees with increased financial flexibility. Typically, if a plan permits loans, participants may borrow a certain percentage of their vested account balance, subject to specific limits and repayment terms. While there are some plans that do not allow loans at all, and others which may restrict loans to certain conditions, the overall trend among employer-sponsored 401(k) plans tilts towards the inclusion of this feature, reflecting employer recognition of employees' needs for liquidity. This accessibility can be crucial for participants facing unexpected expenses or financial emergencies.