Has anyone dealt with a plan in which participant loans were treated as plan assets and the interest paid on the loan was shared by all participants in the same way as any other general investment of the trust?

Is this allowable?

Is this treatment of participant loans specified in either the loan policy or the plan document?

What other information is important if participant loans are treated as an investment of the plan rather than of the participant with the loan?

Yes, it is allowed.

If the plan allows loans, the document should address whether the loan is an investment of the plan as a whole, or a directed investment of the participant.

The document that I am must familiar will state that loans are directed investments of the participant, otherwise they are investments of the plan as a whole.

If loans are investments of the plan as a whole, then everyone in the plan shares in any participant loan. Each participant (irregardless of whether they have taken a loan) will have as one of their investments the plan loans. This loan account will be shown on any participant statements issued. Each participant will share in new loans, loan payments and interest and the amounts will be adjusted in this account at each valuation.