loan fee

[EBDI]

Can an employer deduct $5 per payroll from the participant for handling loan repayments to the retirement plan? I haven't ever had a client ask to do this and I am not finding much online. My gut says no...

[ETA Consulting LLC]

Not sure what exactly the employer is proposing. I would tend to agree with you. It sounds as if the employer is proposing to bill a participant (outside of the plan) for exercising his rights to a loan offered under the plan. I don't think that would fly.

Obviously, a plan's operational expenses increase when it offers additional features (i.e. loans); And reasonable expenses may be passed to the participant involved in that transaction. But, who is receiving the fee when the employer proposes to withhold an amount from the particpant's payroll when a process is, presumably, in place to withhold amounts and remit them to the trust.

I'd say of the employer doesn't want the additional headache of withholding payroll, then they shouldn't offer loans. I wouldn't do it. Wouldn't be surprised, however, to see it done.

Good Luck!