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The payroll system cannot accommodate an after-tax deduction? Or is it the mechanics of auto-stopping that is the issue?

Sure, why not? (sarcasm) Setting aside the absurdity of the whole scenario, I guess you could have the participant write checks to the employer (assuming it is a platform system where ACHs have to come from the sponsor) or write checks to the plan. How big (or small?) can this employer be that it can't handle loans in payroll? If they decide they can't handle it, the loan program can be terminated, although I don't see how you could cancel an existing loan.

Not to throw gasoline on the fire, but I wonder if the Plan document or the Loan Procedures requires payroll deduction of loan repayments.

Um ... What does your service agreement say? It is critical that you not take on any responsibility carved out in your service agreement, and also that you do what you say you will do. Talking to participants engenders risk. There is a recent case where union officials who knew little about a pension plan gave participants advice about the plan anyway. One such person told a dying participant that he should not terminate employment, but should die "in service" to best benefit his soon-to-be-widow. He was wrong. The widow sued. The court found that the union had breached its fiduciary duties by having people giving advice to participants who weren't qualified to do so. There's nothing wrong with a TPA giving a participant information or advice. But, the owner of the company should be the one deciding whether to do so and who is qualified to do so, and the service agreement should match. IMHO.

Agree with this. They've never done a payroll advance? Or deducted for United Way? I find it hard to believe.

What Bird says and while switching to another payroll system may not be their preferred choice, I'm sure it can be done.

BenefitsRUs21, I agree with CuseFan, but would add that it, e.g., this is a corporation and you have a board resolution adopted (e.g., by unanimous consent or at a meeting of directors) before end of 2018, that may be enough for adoption. Depending on the entity's type and governance, adoption may occur before signature by officer on amendment. often, however, signature is all you have, so the foregoing may not be relevant to your situation.