I have seen it commonly mentioned that 401K loans are offered commonly at Prime + 1% rates? But is that required by law? What section of the tax code addresses the upper and lowerbounds on interest rates in 401K loans?
A company 401K might like to make a scheme of dropping interest rates for long term employees who have accumulated certain amounts of money in the account as a way to reward long term commitment/ease in case of emergency withdrawals.
On the opposite end, say in the personal example, you have an independent 401K and happen to be a pretty suave investor but need money immediately, and would like to pay yourself 7% for the year.
Both of these seem like valid instances to deviate from the standard Prime + 1% interest rate. Legally is there any thing stopping either scenario?