Typically employees pay back 401(k) loans via payroll deduction, but if they are on unpaid leave they must keep up on the payments by sending in checks. I'd like some feedback on how other employers are handling this - for example, do you have the employee send the checks directly to the vendor or do you have them submit to you and then do something on the payroll side to send the payments on the next file feed to your vendor? Sending checks directly to the vendor is the easiest, but if the employee does not notify us our system will take arrears to catch them up and overdeduct when they return. If they give the checks to us it seems more accurate, but would involve more work on the payroll side to potentially enter payments on every biweekly payroll. The same issue exists at the end of a loan, when the employee pays off a remaining balance via check to the vendor. In that case, we end up over-deducting by one payment due to the timing of when the vendor notifies us which we have to refund to the employee. Not ideal. Let me know how your company does this - and if you handle it differently for employees on leave vs. loan payoffs at end of loan. LOA = I'm aware of special rules for long LOA >6 months, this question is addressing shorter leaves where they do not qualify for anything special so must keep up. Thanks!
