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#62876 - 02/21/03 07:03 PM 401 k loans

The payment amount and total payment amounts noted do not agree to the payment amounts that are being withheld from the employees pay for about 10 loans. I need to know if the employee should sign a new Reg Z to match what he/she is actually paying or should they just make sure this does
not happen in the future???

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Operations Compliance
#62877 - 02/21/03 10:02 PM Re: 401 k loans
KSK Offline
Gold Star
Joined: Jul 2001
Posts: 357
OOOOOOO! - Reg and 401k Participant loans - Anyone around here can tell you I don't like them !@#$%^&(*!

But my thoughts are these.....

Better make sure that the TIL is accurate and that the total of payments noted in the top portion does in fact agree with the payment stream disclosed below. If it doesn't, it can throw the APR out of tolerance and subject the trustee/recordkeeper/plan sponsor (whoever is taking on the responsiblity for preparing the disclosure) to reimburseable violations.

As for the payments that are being withheld from the employee payroll, double check to see what the instructions were to the employer. That should help to define who was responsible for the accuracy and potentially the liability.

If you are only talking 10 loans, go back and re-amortize the loans based on the actual payments you have received. If the repayment term is less than five years (and the loan is not secured by the primary residence) then prepare an amended TIL and send it and an Oops letter to the participant.

If the re-amortization extends the repayment beyond the five years, the solution will likely involve re-casting the loan to bring the term within the initial five year period. If this amounts to an adverse financial issue to the participant, the right thing to do would be for the party that is responsible for the error to own-up to the error and do a voluntary reimburseable to the participant. (Don't reimburse the plan, otherwise you get into party in interest issues - and you don't want that)

Good Luck!

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#62878 - 02/22/03 10:54 PM Re: 401 k loans

thank you karen, that's what i thought. was not happy to find these issues.

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