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Maximum Loan / market dropped


Lou81

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This should be simple but I am struggling for an answer..

I have a participant that requested the maximum loan available. 

Did the loan paperwork.     He returned paperwork and the market has gone down. 

Can i process for the amount on paperwork or do can he only have the maximum on the date it is processed?

If the later, do I have to redo the paperwork for the new amount?


Thank you!

 

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Although it sounds like a great idea to process the loan as of the date the loan was requested, you most likley won't be able to submit the "Sell" order from the investment funds in your daily valuation software for more than 50% of the current VAB.  You have a couple of choices, if he is close . . . wait for a few days for the market to change and/or another payroll contribution to be made, or do new loan paperwork.  In the future, you may want to set a procedure for howyour organization handles max loans for people who may run into this issue. 

Pamela L. (Bobersky) Shoup CEBS, RPA, QKA

AMI Benefit Plan Administrators, Inc.

100 Terra Bella Drive

Youngstown, Ohio 44505

800-451-2865

www.amibenefit.com

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The March 2020 discussion describes what a plan might permit without offending ERISA § 408(b)(1) or Internal Revenue Code § 72(p).

But a plan’s governing documents (whether a base plan, adoption agreement, trust agreement, or a procedure under a delegation or authority from a governing document or a fiduciary’s powers) might state provisions narrower than what the plan might allow under public law.

A document might treat a plan administrator’s approval of a transaction as not final until the administrator’s instruction to its service provider is delivered to the service provider and by it determined to be in good order.

That might help avoid a software constraint of the kind Pam Shoup describes (if the service provider processes an instruction on the same day the provider determined the instruction to be in good order).

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Is the loan for the full vested account balance (<$10,000) or 50% of the vested account balance.  Obviously, if the former.  With respect to the latter, if the plan so provides, the date of the loan can probably precede the date of disbursement, but why take risks?  
 

perhaps your loan process could stand some updating where the individual could elect an amount or “the maximum as of date the loan is processed - currently estimated as $xx,xxx.

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