Thursday, August 22, 2013

401K Loan & LOA

How does your organization handle employee 401(k) loan payments while an employee is on non-military LOA?  I've recently learned how my org does it.  They have the employee mail us the check.  Our payroll team makes an entry within the payroll system, and then the loan payment data is recorded with all of the active employee deferral data on a weekly feed to Vanguard.

Does this seem strange to you?  A 401(k) loan repayment does not impact the W2.  Why is payroll doing this?

My proposal to our pension team includes these two options:

1.  Have the employee make the payment directly to Vanguard.
2.  Have the employee send the payment to them, and they can communicate to Vanguard that a payment was made.

Agree/disagree?

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