Terminated participant with outstanding loan balance

[Guest pay]

Can anyone advise if a participant who has terminated employment and has an outstanding loan balance can repay the loan after termination? If so, what is the time limit in which he has to repay? The reason is, I have a client who wants to send a letter to terminated participants offering them a chance to pay their outstanding loan amount. Can they do this?

Thanks!

[Dan]

A plan sponsor may demand payment for o/s loan for terminated participants or he may permit them to continue making payments. The plan is not obligated to receive payments after termination of employment. Most do not want to deal with the administrative hassles.

As far as timing, payments must be paid according to the terms of the note and the note satisfied by it's original due date.

[Wessex]

Sorry to replay an old song, but what do the plan document, the SPD, the loan policy, and perhaps most importantly, the promissory note and security agreement say happens upon termination of employment?

If somehow all these sources are silent, unless the note is payable on demand or the events of default include either or both of termination of employment or failure to repay through payroll deduction, the participant probably has the right to continue repayment after termination of employment.

Other potential issues: Was the participant informed of the tax consequences if loan payments cannot continue after termination of employment? Do the loan documents provide for consent to the loan offset that would satisfy the 401(a)(11) consent requirements?