We have a company that allows loans in their plan and regularly lay off some employees in the winter for 3-4 months. Obviously then they cannot deduct the loan payments out of the employees payroll. And trying to get loan payments from them while laid off is proving to be very difficult! Does anyone know if there is a way these guys could be set up on an 8 month payoff - with bigger amounts during the time they are working and then no payments during the time they are laid off? I think it would be easier on both the participant and the employer. Any suggestions on how to handle this? Thanks!

A suggestion:

The amortization requirements of IRC §72(p)(2)© require that the principal and interest payments must be amortized in substantially level (equal) payments. These payments must be made on at least a quarterly basis.

If your loan policy allows, and the participants can do it, set up the loan for quarterly payments. May work out depending on the timing of the leave.

Another suggestion:

If the loan policy allows, the participant could reamortize the loan each time he/she came back from an unpaid leave of absence. Not much fun if you are the recordkeeper.

Both great suggestions - I will look into them - thanks for your response.