Participant Loans

[Guest sritts]

I have a Plan that would like to add the ability for Participants that are out on an eligible LOA, with no or reduced rate of pay to obtain a new loan and be able to suspend the loan payments while on leave.

It is unclear to me when the loan suspension period begin when a participant is on a eligible LOA. Does the 12 month suspension period begin with the first day of the eligible leave or the first day of the loan payment due date?

All the examples I find in the regs. show the suspension applied to participant loans that were already in existence prior to leave. I cannot find any examples of a loan being initiated while the participant is on a LOA.

I appreciate any guidance you can give.

[masteff]

The reg Q&A-9 says "The level amortization requirement of section 72(p)(2)© does not apply for a period, not longer than one year". The amortization requirement goes w/ the loan repayments, not w/ the leave of absence. So at whatever point during the leave you start to apply the waiver under Q&A-9, you then run it for lesser of 12 months or return to work. For example, a person continues making payments for 6 months of their leave and the requests to stop payments, you'd start the 12 months from that point and not the start of the leave.

[Guest sritts]

The reg Q&A-9 says "The level amortization requirement of section 72(p)(2)© does not apply for a period, not longer than one year". The amortization requirement goes w/ the loan repayments, not w/ the leave of absence. So at whatever point during the leave you start to apply the waiver under Q&A-9, you then run it for lesser of 12 months or return to work. For example, a person continues making payments for 6 months of their leave and the requests to stop payments, you'd start the 12 months from that point and not the start of the leave.

Thank you.