WCC

Yes it was in effect when the loan was taken. I have the signed loan docs. The signed docs don't say anything about payroll deduction nor the termination provision. This is why the participant is so upset.

I think the TPA was reading this board I just received the loan policy "the loan will become payable in full on your termination of employment" and "payments will be made through payroll deduction from each regular paycheck". Thanks for the fast responses.

With the plan allowing this terminated person to make loan payments with personal checks for 4 years, I wouldn't want to be the one to over-rule that decision. Changes to the loan program would apply to later loans, but they don't change the terms of an existing loan. How long until the loan is scheduled to be paid off? Now, if this person sent a check that bounced, I think the plan would have an obligation to insist on a form of payment that won't bounce. It is a 30 year home loan and all payments have been made timely. I really don't want to override what has happened nor do I really want to default the loan. I would just like to find some documentation so that if i have to prove why this was allowed, I can do it. At the same time I don't want to perpetuate an error, if it was an error.

It appears that you have already decided that no one would ever be allowed to continue to make payments beyond termination of employment; and that appears to be your default. I say this to illustrate that there is always a default position (what to do when you don't get your question answered). In this instance, do you assume that the loan policy allows continue payments beyond termination of employment since this is how it is being administered; and draft the new loan policy to continue with that operation? Or, do you take a default position that unless they show the language allowing continued payments, you'll assume it didn't exist and then file a VCP submission to correct that this wasn't how it was operated. Questions: Is the plan on an adoption agreement? Are the loan provisions written within the Basic Plan Document? Good Luck! Very well said, that is my exact scenario. The adoption agreement only states the following: Loans. This Paragraph shall apply to the extent that the Plan allows for loans. The provisions of Code Section 72(p) and Treas. Reg. 1.72(p)-l shall apply to the Plan and are hereby incorporated by reference. This wording obviously does not solve my problem. I will continue to try to obtain plan doc and the loan policy (if there is one). Thanks

I cannot get a reponse from the prior TPA after multiple requests for the loan policy. The participnat terminated 4 years ago and has been making payments. The participnat sent me all their loan docs and there is no reference to what happens upon termination.

After much searching, I have a question regarding a terminated employee with an outstanding loan. The loan policy does not require loan payments to be made via payroll. It is my understanding that in most cases loans go into default due to the loan policy requiring payment via payroll deduction, not necessarily because of termination alone. Since payments are not required to made via payroll, can a terminated employee continue making loan payments to avoid default? Are there any regs that would allow the sponsor to not accept a personal check for loan payments? I understand this is inconvenient, a hassel, not ideal, etc. Thank you