Termination of Employment - Time period to repay loan

[Guest SWH]

Have a plan with loan provisions that state that oustanding loans become due and payable upon termination. Loan promissory note says due and immediately payable on date of termination of employment.

what is the experience out there? If a guy is getting laid off, if he does not pay back loan THAT day, is it a default and taxable? In anybody's experience, do you give any kind of grace period to repay?

[Guest BenMngr08]

We give a 60 day grace period to repay. I have personally never heard of a same-day repayment due date...that seems a little unreasable from the terminated employee's standpoint.

[Guest SWH]

The participant still has the 60 days to deposit to an IRA and avoid taxes on the monies. They just can't do it through our plan. It makes their taxes a little more complicated b/c our 1099 will have the monies as taxable.

[QDROphile]

A provision that a loan is due and payable upon an event does not mean that adverse consequences occur at that point. The consequences of failure to pay when due is a different matter, which gets you into your grace period question.