Huntington Ingalls Offers Employees Alternative to 401(k) Loans

When Kimberly Csan, the corporate director of benefits strategy and engagement at Huntington Ingalls Industries Inc., noticed her employees were using the company’s 401(k) plan as if it had a “revolving door” by frequently taking out 401(k) loans and hurting their long-term savings, she knew something needed to be done. 

401(k) Loans Hurting Retirement Preparation 

Many years ago, Csan says, HII, the largest military shipbuilding company in the U.S., would allow participants to have two outstanding 401(k) loans at a time, which she says is “extremely detrimental” to one’s retirement savings. 

“We had gotten some feedback that [taking out loans] wasn’t always a need,” says Csan. “It ended up being habit. They would pay one off … but [then] would just [take out] another one.” 

When an employee takes a loan from their 401(k), Csan says they often view it as borrowing from themselves, which may seem like a better solution than borrowing from a bank or outside vendor. However, Csan explains that borrowing from the 401(k) only hurts employees in the long run, as it slows their accumulation of savings for retirement. 

After conducting an analysis on the employees taking out multiple 401(k) loans, Csan says HII decided to limit participants to only one 401(k) loan at a time. She says the company received some backlash from making this change. 

“People were so used to that benefit, and they were using it to solve for day-to-day issues,” she says. “So we [realized] we needed to … see what else [was] out there that we could make available to [employees] that will help them with those day-to-day issues.” 

According to the Employee Benefit Research Institute, at the end of 2019, approximately 18% of all 401(k) participants who were eligible for loans had taken loans against their DC plan accounts. The average unpaid 401(k) loan balance was $7,142 among the participants with outstanding loans. 

Deloitte also reported that although many participants repay their loans as intended, around 10% of loans default each year. Among those participants who defaulted on their loans, about 66% of them also cashed out the entire account balance. 

In its analysis of employees from age 18 to 80 working at HII’s shipyards, HII found that only 46% of employees were on track to meet lifestyle goals by the age of 80, and even that is significantly above normal retirement age.  

One Approach to Make a Difference 

In March 2020, right before the COVID-19 pandemic shut everything down, HII integrated Kashable—financial wellness software only available as an employer-sponsored benefit—into its employee benefits platform to allow employees to apply for loans while also improving their credit score. 

“Offering Kashable has allowed even people who have been shut out of traditional banking services to access the credit they need,” said Csan in an email response. “So many people have been afraid to go to a bank. Instead, they sought out high-interest alternatives such as payday loans. Our employees value the ease of being able to get their loan from someone their employer trusts, Kashable.”  

Einat Steklov, co-founder of Kashable, says instead of looking at credit score as a leading indicator of an employee’s candidacy for a loan, Kashable takes into account employment data to determine whether a person will be able to repay a loan. With Kashable, the repayment of loans is done through payroll deductions. 

Kashable competes with similar platforms like SoFi, Salary Finance and Upstart.  

“One of the most important factors that impacts your credit score [is whether] you paid [your loan] on time,” says Steklov. “Because employees are paying through payroll deductions and because Kashable reports it to credit bureaus, two-thirds of the people that take a Kashable loan sees an improvement of 40 to 55 points [to their] credit score.” 

Kashable loan amounts range from $20 to $20,000, with loan terms from six to 24 months. The annual percentage rate for Kashable loans ranges from 6% to 35.99%. In order to qualify for the lowest rate, applicants must have a responsible financial history. 

As an example provided by Kashable, a 12-month, $3,500 loan with a finance charge of $265.74 and a 14.89% APR has 26 bi-weekly installments of $140.49 each.  

According to Nerd Wallet, a good APR for a personal loan is anything below 13.74%.  

In the four years that HII has used Kashable, the company has had a 34% reduction in 401(k) loan applications, totaling 8,000 fewer 401(k) withdrawals. 

Steklov explains that to measure the impact of offering Kashable loans at HII, Kashable worked with Alight Solutions, which looked at the loans being taken from the retirement plan before Kashable was integrated. Alight then compared employees who had access to Kashable with those who did not and found a reduction in 401(k) loans in places where Kashable existed. 

“It was the same employees that were taking the Kashable loans that [previously had taken] the 401(k) loans,” Steklov says. “So it was very clear that the behavior [was] in the same population.” 

Ease of Use 

Csan explains that employees are able to go on the company’s benefits website and find a link to Kashable’s platform to apply for a loan.  

“It’s very easy,” she says. “The payments come out of their paycheck, so it’s not another burden of another bill.” 

Csan adds that even after analyzing a new set of employees that joined the company in December 2023, many of them have taken loans from Kashable, and there has been a significant reduction in employees tapping into their 401(k)s. She says she did not expect to see such a significant impact from the benefit in such a short amount of time.  

Steklov found that 33% of HII employees have engaged with Kashable and its various financial wellness offerings, such as one-on-one coaching.  

“Sometimes an employee’s best option may be taking a hardship loan from their 401(k),” says Csan. “Everybody’s situation is different. What we’re offering here is an option so [employees] are not in that siloed event, and we’re giving them options outside of [the 401(k)] to help them get retirement ready.”  

HII’s employee-base includes more than 44,000 skilled tradespeople, artificial intelligence and machine learning experts, engineers, technologists, scientists, logistics experts and business professionals.  

According to its most recent Form 5500 filing on July 30, HII’s Financial Security and Savings Program has more than $443 million in assets and 15,563 participants.