Patrick401k

Yeah, I am not an accountant for a plan or administrative person for a plan, nor in HR. I was simply attempting to get clarity from an expert relating to a loan, I was under the impression that this is how the Benefitslink forum worked? My bad!

This is where I am confused “The interest repaid are earnings to the plan”. 1) You stated the participant is paying back principal and IR, bi-weekly, which automatically goes back into the same liquidated TDF. 2) The Interest rate on the loan, for sake of argument, (prime + 200bp), amounts to roughly $1800 over 5 years. How can this be both a plan asset, “earnings to the plan”, and also be going back into the participants TDF? This is where I am lost? Where does the $1800 end up? As a plan earned asset or participants savings?

Thanks Lou. So, both Principal and Interest re-payments are allocated back into the participants savings, in 24 payments/ annually over 5 years. Now, the Interest rate loan component, which is displayed on a plans form 5500, is derived from? Is this viewed as a receivable asset of the plan? offset when the participant makes payments, a wash ? Does ERISA regulate or the IRS, just trying to comprehend. Thank you.

I am looking for clarity to the logistics of the process. In a generic example, a participant has all of their savings in one TDF, 20k. Participant takes out a loan for 10k, their amortized re-payment of the loan, will come out of their next paycheck, and go directly into the same TDF? The Principal and Interest will be combined ? Or is the IR siloed? I do not understand the IR of loans appearing on the form 5500?

I am aware all plan sponsors approach loans uniquely. My question relates to a participants reallocation of principal/ interest from the loan. Will a participants biweekly payroll deduction for the loan, automatically be allocated back into the same (TDF) on an amortized level across the 5 year period of the loan? Both principal and Interest? Clarity to form 5500, plan sponsor Interest Rate withholding of loans? Confusing. Thank you. Patrick