plan loans - no income to repay

[Guest justbetmd]

A commission based employee has had his draw reduced to zero. He currently has benefits with the company and a 401(k) plan loan. Pursuant to the terms of the 401(k) plan, loans can only be repaid through payroll deductions. Does he default on the loan? How are his benefits handled? (he pays for the premiums) Any ideas??

[QDROphile]

Perhaps the fiduciary of the plan would be breaching its duty if it failed to accept payment from another source. I cannot imagine tha ERISA would allow the fiduciary to turn away money to cover amounts owed to the plan even if the plan were drafted as you say. I would not want to be that fiduciary.

We sometimes forget that participant loans are loans by the plan and the fiduciary has the obligation to prevent the harm of loan default by taking reasonable actions. Fiduciaries are required to disregard plan terms that are contrary to ERISA. ERISA may not require the fiduciary to take enforcement action (it depends), but when the money is proferred, how can the fiduciary refuse?