Loan fees in Amortization Schedule

[Alex Daisy]

A TPA charges a $150 loan fee to the participants account to process a loan.

Can this $150 loan fee be included in the amortization schedule and paid back into the participants account?

For example:

Loan $10,000

Loan Fee: $150

Amount deducted from Partcipants Account in total : $10,150, but the participant only receives $10,000.

Should the loan amortization schedule be for $10,000 or $10,150?

Any help is greatly appreicated.

ALEX

[Jim Chad]

FWIW, I believe it is legal....but why would anyone want to do it?

This is a fee that can be paid from the account using money that is part employee's and part IRS's.

[MoJo]

The reason you'd want to do it is simply to return the amount of the loan fee (with interest) back into the account. Otherwise, the account sees a permanent reduction of the amount of the loan fee - which over time could amount to more than just aq nominal amount.

[jpod]

This may be obvious, but based on the facts presented the amount of the loan is $10,150, not $10,000. If the participant's loan limit is $10,000, this can't be done. The participant could only borrow $10,000, and end up with only $9,850 cash in hand.

[Alex Daisy]

The reason you'd want to do it is simply to return the amount of the loan fee (with interest) back into the account. Otherwise, the account sees a permanent reduction of the amount of the loan fee - which over time could amount to more than just aq nominal amount.

Mo Jo: I agree with you. The reason to include the loan fee in the amortization schedule is to give the participant the ability to pay back the loan and the loan fee plus interest to their account.

My question now is this allowed by the rules?

[jpod]

Daisy: It is perfectly allowable, provided the extra $150 is permissible under the participant's loan limit.