Loans made inconsistent with loan policly

[Nancy D]

Hi, 

Hoping for some wisdom.

Plan has loan policy saying a participant may only have 2 outstanding loans at a time with the stipulation that one of the loans has to be a primary residence loan.  Sponsor is not involved in loan process having delegated all things loan related to vendor.  In 2016 vendor issued second loans to 3 participants that were not residential loans.     Sponsor would prefer not to ask participants to repay the second loan, though would be open to a refinance of the first loan if possible.   My only other thought is to retroactively amend loan provisions, but I believe this means going through VCP as this situation doesn't meet self-correction by plan amendment.

Thank you in advance for any thoughts.

[ESOP Guy]

I am not 100% sure this will make a difference but it could.  You open by saying the limit is in the loan policy later you talk about amending the plan. 

So is the limit in the plan document or does the plan document allow for a loan policy that is outside of the document and the limit is in that policy? 

[Nancy D]

You're right ESOP Guy, I was inconsistent.   The provision of 2 outstanding loans at a time is stated in the Adoption Agreement.  

Thanks