Outstanding Plan Loans at Plan Termination

[Guest Denise S. Prince]

A big client was acquired by an out of state company and will be closing its doors as of June 30, 2000. Most employers either have been, or will be let go. June will be the last payroll. The 401(k) has 22 loans outstanding as of this date with approx. $277k outstanding. The loan feature was just added May 1, 1999.

Other than the possibility of the acquirer's plan permitting the receipt of rollover loans, any suggestions?

Do any of you have letters to participants with loans explaining options at plan termination?

Any words of wisdom?

[KJohnson]

I typically would flag the loan offset issue in the cover letter to the participant with the application for benefits. I think this is "nice" but not required because the new safe harbor 402(f) notice specifically deals with the tax treatment of loan offsets.