Early loan payoff

[Guest Melissa Winslow]

I have an active plan participant who would like to payoff a loan he has through a DC plan. The loan policy in force does not have a provision for early payoff. From the materials I have read, I do not see where this item is specfically addressed other than to state the loan must be paid off through payroll deductions.

So, can an active participant payoff a loan early using a personal check? Any citations out there?

Thanks in advance.

[Guest Tim Howard]

I may be off base here, but I think you should first look at the promissary note. Also, I recall from somewhere that if the plan has 25 loans then it is automatically subject to Truth in Lending requirements, which would require notification to the participant of any repayment penalties and/or restrictions.

In any event, virtually all of the plans we administer permit participants to pay off loans by personal check. Most of the time this is done by terminating employees who don't want to take the tax hit. Active employees occasionally repay by check.

I have seen plans place restrictions on an active participant taking a new loan after repaying an old one.

Can anyone confirm my recollection of applicability of the Truth-in-Lending requirements?