I have some 401 (k) Clients with account balances at Manulife. The people have terminated with outstanding loans. Manulife continues to accrue interest on these balances. Is it the Employer's OGLIGATION to advise Manulife to default these loans? The participants have not requested a distribution. Do you see any problem with the loans just remaining on the books as an asset?

I do see a problem with the loans just remaining on the books. I assume no payments are being made?

There have been many discussions about this topic. Here is one that may be of interest where Dave B. links to the regs.

http://benefitslink.com/boards/index.php?showtopic=7075

CGBS - Manulife will not default the loan until they are advised to do so by the employer. As a TPA, I feel obligated to bring this to the attention of my client. But I don't find out about it until it's too late. I have given Manulife a "wish list" and one of the things I asked for was a report detailing loans and the last date a payment was received. Perhaps if enough of us fuss, we can get some action!

Thanks Brenda - I agree. I now go on the internet use the loan feature to see when the last payments were made on all the loans. But even when I inform my clients some don't notify Manulife to default them. Thanks for your response. I feel like I'm not alone!