Temps making Loan Payments

[Guest BigBish]

Participant goes from regular to temp status. Plan does not allow temps to participate, but she is allowed to stay in Plan. Contributions stop, but should loan payments stop as well? Does no longer fulfilling the requirements for being a participant also require her loan payments to stop?

[Guest Sieve]

Plan cannot exclude temps (except by denying eligibility based on job classification). Besides, once someone is a participant, then participation continues despite moving to reduced hours (although there may be no eligibility for an allocation of a match or discretionary contribution if there is an hours requirement for such employer contributions)--that person is not "allowed" to continue participation, but that person is, in fact, a continuing participant. (Remember, participation in a plan does not mean actually deferring, but simply having met the plan's eligibility requirements.)

Now, if eligibility standards are increased from, say, 500 to 1,000 h/s., and an individual once a participant is, in fact, no longer eligible to partcipate, then that person would remain a participant for purposes of repaying the loan--and, perhaps, for other purposes, as well (such as receiving SMMs, SPD updates, SARs, etc.).

[austin3515]

Agreed that the category "temp" would not be a permissible exclusion since the classification is based inherently on service.

But let's the employee transfered to the mail-room, and mail room employees are excluded from the Plan. Regardless, loan payments must continue because repaying loan payments has nothing to do with accruing benefits/participating under the plan. Rather, the participant loan is an INVESTMENT of the Plan which the trustees have a duty to collect.

[masteff]

Participant goes from regular to temp status. Plan does not allow temps to participate, but she is allowed to stay in Plan. Contributions stop, but should loan payments stop as well? Does no longer fulfilling the requirements for being a participant also require her loan payments to stop?

First, I assume your usage of "temp" really means terminated employee who is now working via a third-party agency. (If you mean "part-time" then please clarify as that's very different than "temp".)

So the issue isn't regular vs temp... the issue is regular vs terminated. 1) what does your plan say happens w/ loans after termination? Are they due in full w/in a certain time limit or can the participant continue to make payments? 2) the participant is no longer on payroll, so if they are allowed to make payments, then you have to provide a coupon book or otherwise accomodate how she is to make payments. (if the person is still on payroll, then she's not a "temp" by definition and you'll need to clarify.)

[BG5150]

Bottom line: If the person is still working for the company, but is now in an excluded class, loan payments still have to continue. If the person has been terminated, see the plan document or loan program and/or loan documentation to see how it should be taken care of.

On another note: be careful when you are deciding who is eligible or not to make deferrals (or to get a match or PS). The plan may be set up so "temp" (or part-time, if that is the meaning here) people never become eligible, but if someone satisfies the eligibility requirements, that person remains a participant even though he or she may now be scheduled to work less than hours needed for initial eligibility. That is, unless that person's job classification is specifically excluded from participating.

For example, eligibility reqs are 1000 hrs in 12 mos. Suzie works 1200 hours in 2006, '07 and '08. In '09, she is now only working 850 a year. Jsut beacuse her hours got cut, doesn't mean she isn't in the plan any more (though it may mean she doesn't accrue vesting service). Unless Suzie's job classification is expressly excluded from the plan, she stays in.