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403b plan loan problems

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I have a new plan (new to us) that we have just gone through a conversion from Met Life to Nationwide. The plan apparently has some loans. There were two loans as of 12/31/13, yet three more loans were taken out from MetLife just prior to the black out period.

The plan sponsor has stated that the loans were collateral loans made between the participant and MetLife and that the ER was not involved or aware that they were being granted. The participants paid the loans back to Met Life on a quarterly basis. The loan application that was provided to us (the TPA) by MetLife has the amount initially borrowed and length of loan, but not amort sch, no interest rate and no end date. Nationwide has been asking for this data so that the loans can be set up on their site so that they can be tracked.

Have I mentioned that their plan document states loans are to be repayed via payroll, etc.

I have pretty much had it with these people (toss in the broker) and I don't know what else to do about this fiasco. Anyone have a similiar situation in the past? It's like trying to put the puzzle together when you are missing a few pieces....

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During my career transition to the not-for-profit world I discovered that 403(b) loans are not necessarily like the 401(k) loans I was used to. My experience with TIAA-CREF loans is that the loans are NOT coming out of the participant's account or even the plan assets, but are coming from TIAA general assets. The participant account is used as collateral but is not otherwise affected. Loans are repaid to TIAA, not the plan, and TIAA earns the interest. THe participant account continues to earn interest based on how it is invested.

Is this the type of loan you are dealing with? If so, it has implications both for the participant recordkeeping and the 5500.

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I'm seeing a similar 403b loan situation in which the trust itself shows no actual withdrawal of the loan, though an equal amount of the loan is transferred into the cash account. However, interest on the loan is paid back to the participant.

Question here though are the 5500 implications - I'm thinking such loans are not necessarily shown on the Schedule H because the amount is shown as a cash asset.

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On 10/11/2014 at 5:02 AM, EPCRSGuru said:

During my career transition to the not-for-profit world I discovered that 403(b) loans are not necessarily like the 401(k) loans I was used to. My experience with TIAA-CREF loans is that the loans are NOT coming out of the participant's account or even the plan assets, but are coming from TIAA general assets. The participant account is used as collateral but is not otherwise affected. Loans are repaid to TIAA, not the plan, and TIAA earns the interest. THe participant account continues to earn interest based on how it is invested.

Is this the type of loan you are dealing with? If so, it has implications both for the participant recordkeeping and the 5500.

Hi! We have some 403(b) plans with loans and I don't understand how the loans are not coming from the plan assets? :huh: Don't the loans have to be made by the plan to the participant and be subject to the rules on maximum loan amount and repayment frequency and amortization etc etc so the loans aren't an assignment or alienation of the participant's benefit? :(

I have been searching the threads on this site and someone on another thread said that loans that meet the requirements of 1.401(a)-13(d) would not be an assignment. But that regulation says the loan has to come from the plan? So if the 403(b) loan isn't coming from the plan assets then it isn't coming from the plan, right? :huh: And if it isn't coming from the plan then it doesn't follow the regulation to use the participant account as collateral for the loan, right? :huh: So how exactly are these loans ok? :wacko:

The plan provision providing for the loans must be limited to loans from the plan. A plan may not provide for the use of benefits accrued or to be accrued under the plan as security for a loan from a party other than the plan, regardless of whether these benefits are nonforfeitable within the meaning of section 411 and the regulations thereunder.

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