Loan Rollover

[Guest Beachgirl]

I know that a loan in a qualified plan can be rolled over to another qualified plan, provided the receiving plan allows loans and will accept a rolled over loan. My question is this: since the promissory note is between the participant and Plan A, will a new promissory note or some other type of agreement need to be executed between the participant and Plan B in order for it to be "enforceable" and a legitimate asset/loan of Plan B? In the situation we have, the participant terminated from Company A and hired on with Company B, which are unrelated employers. The participant has a loan against his account with Company A's plan and rather than have the loan distributed to him (he cannot pay the outstanding balance all at once) would like to roll the loan with the rest of his account in Plan A to Company B's plan and continue to make payments through payroll withholding. Plan B allows loans and loan rollovers.

Thanks for your help.

[Guest mjb]

Normal procedure is for Plan A to prepare a document assigning the loan to Plan B and have Administrator for Plan B sign as accepting the assignment. The assignment would be attached to loan note from Plan A.

[Kirk Maldonado]

I think that the employer accepting the loan rollover should require the participant to execute some new documentation, if for no other reason but to demonstrate that the participant has agreed to have the loan repayments be withheld out of his or her paychecks. This is because many state laws require that an employee agree in writing to any such payroll withholdings. It also avoids the issue as to whether or not ERISA preempts those state laws.