Active Duty and Loans

If plan allows for Loans, can an employee who is on active duty (and has been 3 years) take a loan?  Plan does allow for distribution for deemed severance of employment, but client wants to give loan option to employee if allowed.

Thanks.

1 hour ago, cpc0506 said:

If plan allows for Loans, can an employee who is on active duty (and has been 3 years) take a loan?  Plan does allow for distribution for deemed severance of employment, but client wants to give loan option to employee if allowed.

 

Thanks.

Our loans require payroll withholding repayment; if there is no current payroll, I would think no loan would be available. I have not reviewed all our language to see if there is any possible exclusion for active duty folk, but I don't think so.  FWIW.

Under The Uniformed Services Employment and Reemployment Rights Act, a plan may suspend loan repayments for a participant on active duty.  The loan repayment period can also be extended to the original loan maturity date plus the service period during which repayments were suspended.  Interest on the loan during active duty should not exceed 6%.

My loan procedures expressly allow for this.  I would approve it for payroll withholding and then suspend repayments.  Im not sure if I would do it if the document/procedures are silent on it since USERRA says that plans may suspend loan repayments, but you could probably add it to your loan procedures before he/she takes the loan.

My plan has allowed plan loans, regardless of employment status (using 21st Century, electronic banking, since 1986.  A loan can be initiated by any participant, including separated, on leave, retired, etc. - regardless of age or payout status.  

On 9/27/2019 at 10:42 AM, cpc0506 said:

If plan allows for Loans, can an employee who is on active duty (and has been 3 years) take a loan?  Plan does allow for distribution for deemed severance of employment, but client wants to give loan option to employee if allowed.

 

Thanks.

As an aside would USERRA allow you to deem this person as severed if they been on active duty the whole time?