EP Examination Process Guide - Section 9 - Participant Rights - Participant Events - If a Participant Requests a Loan
If the plan provides loans to participants and if a participant requests a loan, there are several documents that the participant should receive to satisfy the loan requirements.
Loans (from defined contribution plans)
Description: To receive a loan, the participant must apply for the loan and meet specific plan and statutory requirements. If the participant fails to meet these requirements, the loan may be treated as a distribution and taxable to the participant.
What It Should Contain: When a participant requests a loan, the participant should receive information describing the availability of and terms for obtaining a loan. Some information that may be provided to a participant is as follows:
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loans are/are not permitted;
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minimum dollar amount required to obtain a loan;
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maximum number of loans permitted by the plan;
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maximum dollar amount permitted;
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term of repayment (number of years);
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interest rate information;
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security for the loan;
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how repayment may be made (for instance, payroll deduction); and
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spousal consent requirements.
The participant should also receive an application and/or instructions for how to apply for the loan.
Timing: A participant should receive a loan application upon request from the plan administrator.
Who Is Responsible For Sending It: The administrator of the plan.
