When Must Loan be Repaid if Plan Terminates?

[Susan S.]

A participant loan program specifies that a participant loan "is due and payable on termination of the plan." If the plan terminates on December 31, must the loan be paid off before that date, or does the participant have a certain number of days to make the payment after being notified, even if it extends the repayment date beyond the plan termination date?

[ETA Consulting LLC]

This is open to interpretation. I would continue to accept loan payments until the participant is actually paid out their plan balance due to the plan termination. The language in the loan program seems to address the issue that the plan will no longer be in existence to collect loan repayments. So, if you have 3 years left on your loan but must pay out all balances within 12 months of plan termination; then the plan will not remain open for purposes of collecting the loan payments. Hence, the loan must be due and payable. I wouldn't lose any sleep over continuing the loan until the balance is paid out.

Good Luck!