Loan refinance

Is there a limit (with the exception of the 50,000 and or 1/2 the vested value)   that  should be followed regarding  the number of times a participant can refinance a loan?

You don't want the re-finance to extend the loan past the original 5 year limit. That violates 72(p).

I have a ppt that is at 19 refi's . still under the 5 years, Still not at the 50,000 or 1/2 vested value yet.

I am just trying to make sure I am not missing anything. Thanks!

The rules for refinanced loans are in 1.72(p)-1, Q&A 20.  Depending on the exact situation, it can get interesting. I find it helps to have the reg in front of me when looking at it.

New loan policy needed?????

7 hours ago, SCSFAM03 said:

I have a ppt that is at 19 refi's . still under the 5 years, Still not at the 50,000 or 1/2 vested value yet.

I am just trying to make sure I am not missing anything. Thanks!

 

 

You also have an absurd plan provision/loan policy that does not restrict such action.  Just an FYI. Loan provisions in a plan can be modified; suggest the client consider that.

Of course none of those recommendations work if the borrowing-fiend is the owner of the plan sponsor, but they're never the ones to push the limits on administrative burdens!

20 minutes ago, CuseFan said:

Of course none of those recommendations work if the borrowing-fiend is the owner of the plan sponsor, but they're never the ones to push the limits on administrative burdens!

In that case the TPA needs to be very sure the Engagement Letter fees cover the cost of all the work of a refinancing a loan.  

A $100 per refinance fee, for example, would make a lot of people pause before doing it 19 times in less than 5 years.  And if it doesn't slow them down at least the TPA is very sure they are being paid for the work.  

Need to be sure the refinance calculation is taking into account the highest outstanding loan balance in prior 12 months for the 50% determination.  As the balance grows, the participant may hit the 50% limit.  Also, the plan approver of the loan may need to review the ability to make loan payments with the new loan.  I've had loans with payroll deduction requirements rejected by plan authority as the new loan refinance would cause the per payroll deduction to exceed the participants salary each pay period.

I don't admin DC plans, but I thought the highest outstanding balance consideration only applied to the $50,000 - so someone could not take additional loans to maintain a continual $50,000 loan balance - but does not apply to the 50% vested balance limitation.

You are correct.  My bad.  I was thinking too far ahead when typing.  I did mean to indicate the $50K limit, but was already thinking about how the participant may eventually hit the 50% limit.