Prepaying ESOP Loan - 415 Issues

[Guest sjlbenefits]

A 100% ESOP-owned S-Corporation would like to prepay its 10-year ESOP loan that matures in 2014. The S-Corporation also has a 401(k) plan. Two participants have already had their ESOP benefit curtailed in prior years due to the 415 limit.

If the S-Corporation prepays the remainder of the ESOP loan in one contribution to the ESOP, the remainder of the ESOP shares in the suspense account will be allocated to participant accounts in accordance with the plan document.

Can anyone confirm that the participants who normally hit the 415 limit in a plan year will not be permitted to share in this allocation of remaining shares resulting from the loan repayment due to the application of the 415 limit? If so, I understand that some additional participants may also hit the 415 limit due to the additional allocation of shares resulting from the prepayment of the ESOP loan and will also be prohibited from receiving an allocation of these shares once they hit the 415 limit. Is there some way to prepay the ESOP loan and not be impacted by the 415 limit?

Are there any other issues related to prepayment of an ESOP loan, other than the application of 415? All of the loan documentation permits loan prepayment without penalty.

Thanks.