Procedures on defaulted loans

[Guest mwilson]

The DOL Regulations provide fairly detailed guidelines on the definition of "adequate security" for purposes of employee loans. Unfortunately, the Regs do not specify the procedures for collecting the "adequate security" on a defaulted loan when the loan is greater than 50% of the participant's vested balance (requiring the participant to use both plan funds and other assets, unrelated to the plan, as security on the loan).

Additionally, the Regs do not specify when a plan is in default, other than stating that the plan's written loan program must establish guidelines as to when a plan is in default.

(1)Are the DOL regs enough to determine whether a participant is in default on a plan loan? Do you use other law, or is the plan document truly the authority on this matter?

(2)Do non-ERISA laws (e.g., bankruptcy, lending, tort, etc) affect the procedures for collection of a participant's "adequate security," especially when the participant uses assets unrelated to the plan as security? Am I missing something here?

Thanks in advance for any answers.