SECURE Act: Qualified Employer Plans Prohibited from Making Loans Through Credit Cards and Similar Arrangements

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) includes a provision that prohibits the distribution of plan loans through credit cards or similar arrangements.

In recent years, some plan administrators have begun allowing participants to link a credit or debit card to their 401(k) account, with any purchases made using the card taken as a loan against their 401(k) balance. While plan loans are generally permitted for any purpose provided the terms and amount of the loan fall within prescribed limits, the use of credit cards has raised concerns that such easy access to plan loans could lead participants to deplete their retirement savings by making small or routine purchases.

The prohibition on the use of credit cards, which applies to loans from all qualified plans, takes effect immediately. Any future purchases made with a credit card linked to a retirement plan account will be treated as a taxable distribution rather than a loan, which could in turn trigger additional qualification failures if the participant was not eligible for an immediate distribution at the time the purchase was made. Plans with a credit card program in place should take immediate steps to deactivate the cards and notify participants how to take plan loans through other means.

Interested in learning more about the SECURE Act? Download the SECURE Act eBook from the Schneider Downs Retirement Solutions team for a full overview of provisions and highlights at

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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