loan payment

[Earl]

Can a loan be paid back with non-cash assets? It is publicly traded stock so value is not the issue, just the concept.

The loan policy does not specify "repaid in cash payments".

[TPAMan]

Our loan policies generally require payment via payroll deduction only and fortunately, we have not have any participants paid soley in publically traded company stock. Therefore, the question has never came up and if it did, I would just say "no!".

Basically, we find the dollar to be the most efficient manner for transacting business including participant loans payments. Tracking, timing and valuing 'in-kind' loans payments would clearly increase processing costs and, most certainly, violate the level amortization requirements of 72(p) unless you are talking about frational shares.

Good luck with that.

[Earl]

Its actually a husb & wife only plan and they want to pay off $85k.

I can't find anything that says "payment in cash" and even if a policy says cash & payroll w/hold, that can be changed. If there are employees I can argue "bad policy" but in this case I don't like to say "no" when I don't know what I am talking about.

Thanks for your imput. At least that means its not obvious.

[Belgarath]

I think that it is likely a prohibited transaction. Morrissey v. Commissioner ruled, as I recall, that repayment of a loan from the plan with property is a PT. Whether this woulde apply to a plan not covered by Title 1 I can't say, nor do I have an opinion, offhand, as to whether a participant loan would be distinguished from another type of loan. Maybe one of the ERISa attorneys can chime in here.

[12AX7]

$85,000 loan? If a participant loan, I hope that's the total between two participants and no participant's loan exceeded $50,000. We all know the drill.