What type of account permits loans to participants without income tax implications?

The correct choice is a Section 401(k) plan because this type of retirement savings account allows participants to borrow against their balance without immediate income tax implications. When individuals take a loan from their 401(k), they are not required to pay income taxes on the withdrawn amount as long as the loan is repaid within the stipulated time frame, typically five years, although this can vary depending on the purpose of the loan (for example, loans for purchasing a primary residence can have longer repayment terms).

Loans from 401(k) plans are distinct because they provide participants access to their savings while keeping it intact for retirement purposes. It’s crucial to adhere to the plan's specific repayment terms because failing to repay the loan could lead to it being treated as a taxable distribution, with potential penalties if the participant is under the age of 59½.

On the other hand, accounts like Roth IRAs and Traditional IRAs do not generally permit loans. Withdrawals from these accounts can incur taxes and penalties depending on various circumstances, such as the withdrawal being classified as a distribution rather than a loan. A Section 457 plan also does not typically allow loans but might offer hardship withdrawals with tax implications. Thus, the unique feature of the 401(k) plan concerning