Opinions Please RE COVID loan

Participant in April, 2020 takes a $50,000 loan

Participant, because of COVID, wants to pay off the first loan to take the $100,000 COVID loan. Participant pays off the loan, requests $100,000. Asset Custodian rejects the loan, saying the maximum loan amount is $50,000; $100,000 reduced by highest outstanding loan balance in the last 12 months ($50,000). I agree with this calculation.

Question is: Is the loan limit calculation a safe-harbor calculation? Could the plan sponsor decide to ignore the limitations and give the person the whole $100,000 loan? I think not, but wouldn't mind seeing if anybody has run into this before.

Thanks for any replies!

I agree with $100,000 - $50,000 = $50,000.

the participant can take a 100K covid distribution. 

4 hours ago, Degrand said:

the participant can take a 100K covid distribution. 

Good point. Which is the equivalent of an interest-free loan with a more flexible (but shorter, 3 years vs. 5) repayment period.

Thanks for the replies, and I totally agree. It seems to stick in my brain that many years ago a cohort had a plan they worked on that ignored the "highest outstanding balance in the last 12 months" portion of the calculation for new loans.