Karoline Curran Posted January 4, 2019 Posted January 4, 2019 Is there any requirement that participants are notified that their loans will be defaulted once they terminate? I have a large plan whose loans are administered by NW. We as a TPA have minimal involvement. We used to send out default letters to their participants, but because NW now recordkeeps the loans we are not going to do that. Neither does NW. NW will deem their loans for non-payment, but again, not send out a notice. Just wondering if a notice is a legal requirement. Thanks.
BG5150 Posted January 4, 2019 Posted January 4, 2019 It should be part of the loan paperwork they signed. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Larry Starr Posted January 4, 2019 Posted January 4, 2019 6 hours ago, Karoline Curran said: Is there any requirement that participants are notified that their loans will be defaulted once they terminate? I have a large plan whose loans are administered by NW. We as a TPA have minimal involvement. We used to send out default letters to their participants, but because NW now recordkeeps the loans we are not going to do that. Neither does NW. NW will deem their loans for non-payment, but again, not send out a notice. Just wondering if a notice is a legal requirement. Thanks. No. Would be nice and "participant friendly", but the requirement for default is the law, and no notice is required. Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC President Qualified Plan Consultants, Inc. 46 Daggett Drive West Springfield, MA 01089 413-736-2066 larrystarr@qpc-inc.com
Karoline Curran Posted January 5, 2019 Author Posted January 5, 2019 On 1/4/2019 at 2:21 PM, BG5150 said: It should be part of the loan paperwork they signed. It is -- this client is difficult to say the least. Thank you!
Karoline Curran Posted January 5, 2019 Author Posted January 5, 2019 22 hours ago, Larry Starr said: No. Would be nice and "participant friendly", but the requirement for default is the law, and no notice is required. Thank you Larry!
Below Ground Posted January 8, 2019 Posted January 8, 2019 We have a notice sent to the person at termination, not because it is required, but because it reduces problems. Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA
IHC Posted January 17, 2019 Posted January 17, 2019 Just a clarification . . . if the loans are being offset due to a failure to pay the loan in full upon termination of employment, then that is treated as an actual distribution under the Code and a 402(f) tax notice would be needed. If the loans are being treated as a deemed distribution rather than being offset from the participant's account, then I agree with the above. 401king 1
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