Loan defaulted due to administrative issue

[katie58]

The plan sponsor had an employee making loan payments - For some reason, they stopped withdrawing loan payments from his check. (No one knows why)

At some point the loan was defaulted and deemed.

No notice was give to the employee. The employee apparently, never noticed that payments were no longer being deducted from his paycheck.

He is asking that the plan sposor reimburse him for the taxes and penalties he suffered at tax time.

I have never had such a request. Any thoughts or concerns????

Thanks!

[ETA Consulting LLC]

Ultimately,

It is the Participant's responsibility to ensure the loan is repaid pursuant to the terms of the loan agreement. However, there "may be" alternatives under VCP that would allow the plan to restate the loan for the participant and have him catch the payments up.

Good Luck!