loan default

[Santo Gold]

Not 1, but 2 participants in a small 401k plan have loans. Both now say they cannot continue to make the repayments and want to stop. They say that they will pay whatever penalties are involved, tax consequences, etc. Both are under age 50.

Can they just simply stop the loan repayments taken from their pay? Is that an option, they request through the Plan Administrator that the loan repayments cease?

Thanks

[ETA Consulting LLC]

Yes. What you don't want is a situation where the loans are used as a method of circumventing the distribution restriction. But, you may (and some argue should while others argue should not) discontinue the payroll reduction.

Good Luck!

[GMK]

^and check (as you probably already have done) that the plan doc and loan doc do not prohibit the participant from choosing to end payroll deductions or other loan payments.