Loan reamortization

[Guest Thomas Dotts]

Is it legal to reamortize a loan from a 401(k)? what regulations cover this?

[LCARUSI]

Do you have something specific in mind when you use the term "reamortize"?

I can think of many actions which I would call a reamortization which would be okay. For example, a participant is part way through a loan and wants to make a partial lump sum repayment and then continue reduced ongoing loan repayments. I would consider that a reamortization and okay to do.

You should be sure the loan reamortization does not violate either 1) the general rules in sec 72 concerning loans or 2) the provisions of the plan.

[Guest jkirschbaum]

We take the position that the substantially equal language means that the loans cannot be reamortized. I know that is conservative.

[Guest pdall]

I have reamortized loans when a participant adds to an existing loan, but making sure, under 72p that the new repayment period does not exceed 5 years from the original loan.