Loan not paid from payroll

[doombuggy]

The loan policy and the prom note I drafted for a participant who recently requested a $50,000 loan states that they need to make repayments thru the payroll. This guy wants to write a personla check for each payment. I have never had anything but loan repayments made thru payroll (one exception was a termined ee making payments on 2 o/s loans - don't even get me started on that guy...)

I have told this client and the advisor/broker that he needs to follow the prom note (and the loan policy) and make the payments thru payroll. The loan policy is in the SPD - wouldn't they need to amend the doc if they want to allow him to write a personal check to repay the loan?

[Leopurrd]

If he signed a promissory note agreeing to payroll withholding, I'd hold him to it. Most participants don't follow the amort schedule accordingly and it could end up very messy for you and the participant.

From personal experience, if a policy states payroll withholding I don't accept personal checks. If you have a participant who wants to write you a check instead of having it withheld from payroll, there's something fishy there. It nets out the same in my calcs!!!

And, although I'm not sure about your question regarding the amendment, think of the ramification if you can, and do, amend the policy. You'd have other outstanding loans that would send in personal checks for repayment and this can add a lot of processing time to the loan situation - plus the question of, "is the check any good?"

[doombuggy]

Thanks for your opinion! I prepared the loan paperwork according to the loan policy which states that the loans need to be repaid thru payroll. The participant (who is a shareholder and doctor) keeps pushing the issue that he can pay by personal check, as he did on a previous loan. I can't tell if the loan was done under their old document at their prior R/K or here (before mey time). I have given this to my supervisor to handle.

Thanks again!