Is my employer permitted to borrow money from my pension plan, as long as the employer pays it back?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Under no circumstances is it permissible for an employer to borrow money from the company’s pension plan. The law is very strict on this issue and employers will face severe penalties for using pension plan funds for personal use. An employer that provides a pension plan to its employee must adhere to certain standards. If you suspect that your employer is borrowing money from the pension plan, contact the Department of Labor’s Employee Benefit Security Administration to file a complaint.

The federal law that governs pension plans in the United States is called the Employee Retiree Income Security Act (ERISA). Under ERISA, employers that operate pension plans are considered “fiduciaries”, which means that they are trustees who owe a duty of loyalty and a duty of care to pension plan participants. As fiduciaries, employers are required to manage pension plans in an honest and ethical way. Fiduciaries are expressly forbidden from intentionally taking any action that can cause harm to pension plan assets or expose the pension plan to the risk of losing money. Borrowing money from the pension plan, even if the money is repaid, is considered a gross violation of fiduciary standards and should be reported to the Department of Labor’s Employee Benefit Security Administration immediately.

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