Loans from 401(k) to a 403(b)

[jkharvey]

Sponsor of a 403(B) acquires employees of another entity that maintains its own 401(k). These employees have outstanding loans in the 401(k). It is my understanding that when these employees leave the 401(k) entity their loans become taxable as deemed distributions. The 403(B) entity wants to loan these people the money to repay these loans to prevent this taxation. Does anyone see any ERISA or other Plan related problems here?

[QDROphile]

Does the 403(B) employer have the authority and available funds to loan money to employees? Is it prepared to deal with defaults and enforcement? Will it comply with Truth-in-Lending requirements, if applicable? Will it try to restrict the proceeds of the loan to a particulatr purpose (repayment of the 401(k) loan)? You seem to be describing loans from the employer to employees, so there are no ERISA or plan related issues. The loans are simply loans from the employer. For good reason, most employers don't loan to employees, except for the fat cats.

You may want to get a more precise and correct understanding of what happens to the 401(k) loans and possibilities for alternate consequences.