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Level Amortization Rule

Practice Management
Q. Does the "level amortization" rule prevent a participant from prepaying a loan?
 
A. The regulations do not address the impact of prepayments on the level amortization rule. As long as the loan repayment schedule provides for level payments, the plan may allow prepayments. However, the plan may want to charge additional fees for prepayments (unless it is a complete payoff of the loan) because it adds to the administrative costs of loan administration.
 
Editor’s Note:  This is the fifth installment in a series concerning correcting plan loan failures. This content is taken from “Loans: Correcting Taxation, Qualification and Fiduciary Failures,” an April 15, 2020 ASPPA Webinar presented by Stephen W. Forbes J.D., LL.M. of Forbes Retirement Plan Consulting.
 
Opinions expressed are those of the author, and do not necessarily reflect the views of ASPPA or its members.