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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:

  • loans are/are not permitted;
  • minimum dollar amount required to obtain a loan;
  • maximum number of loans permitted by the plan;
  • maximum dollar amount permitted;
  • term of repayment (number of years);
  • interest rate information;
  • security for the loan;
  • how repayment may be made (for instance, payroll deduction); and
  • 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.

Page Last Reviewed or Updated: 30-Sep-2013