401k loan interest rate setting procedure

JanThal

Given the volatility in the housing and mortgage market as well as general credit/debt crisis, we're reviewing our procedure for setting the interest rate charged on 401k plan loans-we're using prime+1% and change the beginning of each quarter.   Regulations call for a "reasonable rate" which seems to leave the practice wide open.   Please let me know if you've made any changes to your practice given the recent market influences....or if you have a practice different than as described, I'd appreciate your sharing.   Thanks.

dhall111

We also use Prime +1% and have no plans to change it.

hrproky

Prim + 1% seems to be the norm.  I would stick with that.