Participant with Loan on Leave of absence

[Guest beccafaith]

I have a participant who has a loan and is currently out on their second leave of absence. Their one year was up in March and their current leave of absence began in April. Both leaves are medically approved.

Has anyone ever had this and how did you handle it?

I have looked at 72(p), but I do not see specific language addressing back to back Leave of Absences and whether or not you can grant another year of not making loan payments.

[R. Butler]

Wouldn't this really be a leave of absence of longer than 12 months?

[Guest beccafaith]

Wouldn't this really be a leave of absence of longer than 12 months?

Yes, it is. This is why I posted here. I have NEVER had this happen before and was not sure since there was a week between each approved LOA if their loan could not be paid on for another one year.

When I read 72(p), I only see LOA, I don't see specific language that says, "you are only allowed one LOA per loan taken out."

[E as in ERISA]

I have no idea what the right answer is. However, I could make an argument for saying the second leave is good. Consider the elapsed time method of crediting hours where you span service if the employee returns within 12 months of the original leave date. The return to employment in your case could be proof of the participant's continued employment relationship with the employer. If the IRS' concern is that there is no definition of termination for plan purposes and you don't know if the employee is really terminated or continuing in employment if the leave goes beyond a year.