You are here:  TSM SmartClient Menu Options > Transactions > Loans > Loan Input
___________________________________________________________________________________________________

Loan Input

A retirement Plan loan is where a participant borrows money from his/her account, and the participant makes payments back into his/her account with interest. The initial removal of the loan balance is not subject to taxes. However, if a participant terminates employment, and the employer does not permit repayment of outstanding loans after termination, then the loan is subject to default if not repaid and could then be taxed accordingly.

 

Within the Loan Input option, you are able to perform the following functions:

·         Enter a new loan and create a pending loan transaction

·         Model a loan and create an amortization schedule and promissory note

·         Create a loan in the system that is being converted from a prior recordkeeper or other provider

·         Default a loan

·         Adjust a loan due to military leave

·         Override loan maximum when entering a new loan

 

How to access the Loan Input screen

Click the Transactions menu, point to Loans and then select Loan Input. The Loans screen appears.

 

How to enter a new loan

This process includes modeling a loan, and creating a promissory note and amortization schedule.

1.     Choose the Plan.

2.     Select or enter the participant.

3.     Choose the product the loan is requested from. This is selected in the IPX Product section. The screen defaults to the Loan Parameters tab, which also provides the amount available for a loan for that participant. Available loan amounts are based on participant account balance and include any Plan and system calculation and parameters.

4.     Click Add to add a new loan.

5.     Choose the Loan Date. This defaults to the current date.

6.     Choose the first payment date (1st Pymt Date). You should consider adequate timing of loan payment processing and also any current processing standards when choosing the first payment date.

7.     Enter the requested amount for the loan in the Request Amount field, which should not exceed the Amount Avail for Loan.

8.     Enter the length of the loan in the Term (months) field. As indicated, this should be the loan term in whole months. The appropriate loan term must be chosen based on Plan and regulatory requirements. For example, if the participant is requesting a primary residence loan, then all required documentation must be present in order to request a loan exceeding five years.

9.     Choose the payment frequency from the Payment Freq drop down. The payment frequency is based on any Plan or processing requirements.

10.  Select the appropriate Type of loan, either General Purpose or Home Loan.

11.  Click the Calculate Payment button if you want to see the loan payment amount (ie. model the loan). This payment amount is based on all data that you’ve entered for the loan.

12.  Click the Transaction Information tab. This is where you confirm or enter all applicable loan fees that should be included for the new loan. Any existing loan fees that have been setup (from the Setup>Transaction Rules>Transaction Fees screen) would appear here to confirm.

a.    Confirm the applicable loan fee is included in the Loan Fees box. If so, continue to the next numbered step. If not, go to the next lettered step here.

b.    Click any of the applicable options: Include Fee in Principal, Include Fee When Calculating APR, or Override Loan Details.

c.    Click the Fee button. A new Transaction Fees window appears.

d.    Click the Special button.

e.    Enter the loan fee in the Amount field.

f.     Click the Gross button to receive the full requested amount of the loan before the fee.

g.    Click Apply. You return to the Transaction Information screen.

h.   Click the Loan Parameters tab to finish entering all loan details.

13.  Click the Amortization Schedule button to create an amortization schedule for the loan data entered. This allows you to see projected total interest, principal and payoff date generated by the schedule. This document can/should be sent to the participant for his/her records.

14.  Click the Promissory Note to create a loan document based on the loan data entered. This document can/should be sent to the participant.

15.  Complete any of the following options:

a.    Override Regulatory Amount – this allows the processing of a loan that is in excess of the Amount Avail for Loan. This option should rarely be used and only after thorough review and approval.

b.    Include Contribution Accrual Funds – check this box to include contribution accrual funds in the Amount Avail for Loan.

c.    Regulation Z – this is only needed if not currently setup for the Plan (Setup>Plans>Plan> Loan tab). This allows the amortization schedule and promissory note to disregard any irregularity in the first payment period that falls within the limits described in the regulations.

d.    Other listed options (Converted Loan, and Military Loans) will be discussed in those procedures in this document.

e.    Process Loan- select this box if you are finished entering the loan details, modeling the loan, creating the promissory note and amortization schedule. This creates a pending loan transaction in the system that will sell the appropriate amount from the participant’s account once traded.

16.  Click Save once all loan details and documents have been created. Follow all trading processes to finish trading the loan transaction.

 

How to convert a loan from a prior provider or recordkeeper

Entering a new loan in the system that has come from a prior recordkeeper or provider is mostly the same as the new loan process, with the following additional steps included. You are also able to use the Interfaces option to upload converted loan details. The interface is useful if you have multiple loans for multiple participants that need to be added to the system. Creating a converted loan does not generate a transaction in the system since you will not be selling shares of a participant’s account, and instead are only making a recordkeeping entry for the converted loan.

1.     Follow all steps for entering a new loan, except do not Save the loan yet.

2.     Click the Converted Loan box on the Loan Parameters tab. This activates the Conversion Information tab.

3.     Click the Conversion Information tab.

4.     Enter the number of Payments Made. This is the number of payments that the prior provider has already applied to the loan.

5.     Click the Add button at the bottom. A line item appears for you to enter the source of money as well as the total amount by source that was already applied to the loan at the prior provider.

a.    Source - choose the source of money the payments have been applied to.

b.    Original Amount – enter the original amount of money that was taken from that source for the loan at the prior provider.

c.    Paid Amount – the dollar amount for that source that has already been paid at the prior provider.

6.     Continue to click Add and add each additional source and payments made at the prior provider for that loan.

7.     Click the Loan Parameters tab.

8.     Change the Rate field to reflect the interest rate that was being paid at the prior provider.

9.     Click Calculate Payment and verify all loan details match what was at the prior provider. If not, make adjustments to the loan as needed, making sure you are falling within the original loan terms.

10.  Create the new Promissory Note and Amortization Schedule. Do not proceed until you have verified all loan details (remaining balance, interest rate, payment amount, etc) are correct.

11.  Click Save.

 

How to default a loan

A loan should only be defaulted when certain that the participant is not going to pay back the loan. Use the following to default a loan.

1.     Go to the Loan Input screen and find the participant’s loan that needs to be defaulted by searching for the Plan, participant, product then loan number.

2.     Click the Loan Default tab.

3.     Enter or choose the loan’s Default Date.

4.     Choose the appropriate Tax Code from the drop down.

5.     If you want to calculate interest on the loan for a specific date range, which is optional, use the following:

a.    Click the Calculate Interest box.

b.    Enter the Interest Start Date. This is typically the last date a payment was made.

c.    Enter the Interest End Date, which is typically the date of loan default.

d.    Click the Calculate Interest button. The interest amount appears in the Calculated Interest Amount field.

6.     Click the Default Loan button to mark the loan as defaulted. A zero dollar LOANDF transaction is created and must be posted in order for the loan to be shown as defaulted.

 

How to adjust a loan for military leave

If a participant had an outstanding loan when he/she goes on military leave, the Plan can allow suspension of loan payments for the period of time the participant is on military leave. When the veteran is rehired after leave, the participant must resume loan repayments upon the end of the military service, and those payments must be at least at the same frequency and amount prior to the military leave, not to exceed the maximum loan term of the original loan plus the military service period.

          Suspend the loan due to military service

Use the following to suspend the loan upon initial notification of military service.

1.   Go to the Loan Input screen and find the loan that needs to be adjusted by searching for the Plan, participant, product and loan number. 

2.   Click the Military Loans checkbox. This activates the Loan Adjustment tab.

3.   Go to the Loan Adjustment tab.

4.   Enter or choose the Military Leave Start Date.

5.   Click Save to a mark as Loan Currently Suspended. Once the end date is known, and loan payments will continue, use the Recalculate Loan Due to Military Leave procedures.

Recalculate a loan due to military leave

Once the end of military service is met, and loan payments should continue, use the following procedures to recalculate the loan end dates.

1.   Go to the Loan Input screen and find the loan that needs to be adjusted by searching for the Plan, participant, product and loan number. 

2.   Click the Loan Adjustment tab (which would only be activated had the loan already been marked as suspended).

3.   Enter the Accrual Rate. This rate should be the loan’s interest rate, or some other percent as determined by the Plan. This field may already be populated, which would have been fed from the Setup>Plans>Plan>Loan tab>Military Leave Interest Rate field.

4.   Enter or choose the Military Leave End Date.

5.   Enter the Military Leave First Payment Date. This is the first date a payment will be made after the end of the military leave. You should also consider normal operations processing dates when entering the date.

6.   Click the Recalculate Loan button. The remaining number of months appears.

7.   Click Save.

 

How to override loan maximums on a new loan

There is a maximum amount a participant can request for a loan, based on IRS and Plan rules. In most instances, the maximum amount is 50% of the participant’s vested account balance, minus any outstanding loans, OR $50,000, whichever is less. In addition, some Plans may allow a loan to be taken for a higher amount from one product, assuming the participant does not exceed that IRS maximum, and assuming this has been approved by an authorized party. In addition, you must have been given Supervisor access (Setup>Plans>Plan-Misc tab, Workflow Settings) in order to submit the loan for more than allowed in the system for that product. If after careful review you have determined that the loan maximum amount in the system must be overridden, you can use the following process to submit a transaction for a new loan over the system maximum loan amount.

1.   Follow all steps for entering a new loan, except do not Save the loan yet.

2.   Click the Override Regulatory Amount checkbox on the Loan Parameters tab, and also ensure the Process Loan checkbox is checked.  

3.   Click the Transaction Information tab.

4.   Click the Override Loan Details checkbox.

5.   Click the Override Loan Details tab.

6.   Enter the total loan amount being requested by source in the Req Amount column.

7.   Click Save once all loan details and loan documents have been created. Follow all trading processes to finish trading the loan transaction.

8.   Be sure to remove yourself from Supervisor access from the Plan setup screen once the transaction is entered.

 

Explanation of Fields

If a field is not mentioned below, it is not currently used.

Field Name

Field Description

Required/Optional

Loan Parameters tab

Effective Date

The Effective Date of the loan transaction is the day the loan proceeds will be traded, which should default to the current business day

Required

Loan Date

The date the loan was first initiated, and should be the same as the Effective Date.

Required

1st Pymt Date

The date the first loan payment is/was expected. Follow all current internal procedures to determine this date, even if the loan was converted from a prior provider.

Required

Request Amount

The requested or original loan amount. As a general rule, this amount cannot exceed the Amount Avail for Loan field, which is calculated by the balance in that Plan in that product.

Required

Fee

The loan processing fee as was entered on the Transaction Information tab, or as predefined within Setup>Transaction Rules>Transaction Fees.

Optional

Loan Amount

The amount the participant will receive as a result of the loan transaction. This amount accounts for any fees that have been entered for the transaction.

Informational

Principal Remaining

The outstanding principal amount of the loan that remains outstanding after the last loan payment.

Informational

Payments Made

The number of completed loan payments to date.

Informational

Loan #

The loan ID number. Each time a new loan is input, the loan number will automatically be the next loan number in the sequence based on the last loan that was entered into the system.

Informational

Rate

The loan interest rate that the participant is paying back into their own account. This rate should either be established for the Plan (Setup>System>Control, or Setup>Plans>Plan-Loan tab) and automatically input, or can be manually input.

Required

Term (months)

The term of the loan in months. This must not exceed, or be less, the maximum or minimum loan term allowed as defined in Setup>Plans>Plan-Loan tab, or as defined by IRS rules.

Required

Payment Freq

The frequency of the loan repayments. You should follow all current internal rules and processes for loan repayment frequency.

Required

Payment Amount

The loan repayment amount. This amount is calculated based on other loan factors that have been entered (rate, requested amount, term, payment frequency)

Informational

Last Payment

The date the last loan payment was received/posted.

Informational

Default Date

The date the loan was defaulted. This only appears if the loan was defaulted.

Informational

Type

The type of loan, General Purpose or Home Loan (for a primary residence).

Required

Valuation Date

The date of the last valuation for the Plan, which should default to the last business date. This date assists with calculations of loan amount available.

Informational

Total Market

The total market value of the participant’s account, which factors into the amount available for a loan.

Informational

Total Vested Available

The vested account balance for the participant, which factors into the amount available for a loan.

Informational

Amount Avail for Loan

The amount available for that participant’s loan. This factors in any Plan limits, as well as IRS limits (50% of the participant’s vested account balance, OR $50,000 minus the participant’s highest outstanding account balance in the past 12 months, whichever is less.)

Informational

Override Regulatory Amount

If this checkbox is checked, you have carefully considered all available loan amounts, and need to override the current available loan amount when inputting this loan into the system.

Optional

Include Contribution Accrual Funds

Select this checkbox to include contribution accruals.

Optional

Regulation Z

Select this checkbox to allow the amortization schedule and promissory note to disregard any irregularity in the first payment period that falls within the limits described in the regulations. The Regulation Z checkbox must also be selected in the Setup>Plans>Plan-Loan tab.

Optional

Converted Loan

This checkbox should be selected if manually entering a loan into the system that is being moved from a prior provider. Checking this box enables the Conversion Information tab for further input regarding the converted loan.

Optional

Process Loan

Select this checkbox if you are ready to process the loan and create a loan transaction in the system. You should not click this box if the loan is a converted loan. Note: after clicking this checkbox, you must also click Save in order to finish the loan entry.

Optional

Military Loan

Click this checkbox to mark the loan as a military loan, which will enable the Loan Adjustments tab. This is used when the participant had an outstanding loan, goes on military leave and the loan payments need to be suspended and/or restarted and new dates recalculated.

Optional

Calculate Payment

Use this button if all loan terms have been entered and you are ready to calculate the loan payment amount.

Required

Promissory Note

This button is used once all loan terms have been entered and you are ready to create the Loan Promissory Note to save and send to the participant.

Required

Amortization Schedule

The Amortization Schedule button should be clicked once all loan terms have been entered and you are ready to create the amortization schedule for the loan, which should also be saved and sent to the participant.

Required

Prev Loan/Next Loan

You only see these buttons if the participant has multiple loans in the system. You can use these buttons to switch between the loans in the system.

Optional

Transaction Information tab

Include Fee in Principal

Click this box to include the loan fee in the principal of the loan

Optional

Override Loan Details

Click this box to activate the Override Transaction Details tab, which would be used to input a loan for more than the regulatory amount.

Optional

Loan Fees

The fee amount to be applied to the loan. This fee can be manually input by clicking the Fee button on this screen, or will display the loan fee already setup for the loan transaction (from Setup>Transaction Rules>Transaction Fees).

Optional

Conversion Information

Payments Made

Enter the number of payments that had been applied to the loan prior to the loan conversion.

Required

Original Loan Amount

This is the loan amount that was entered from the Loan Parameters tab.

Informational

Subtotal Original Amount

As payment details are entered in the Converted Loan Payments box, this field will subtotal the loan amounts.

Informational

Subtotal Paid Amount

As you enter payment details in the Converted Loan Payment box, this field subtotals and displays the paid amount.

Informational

Principal Remaining

The original amount less the paid amounts that were entered from the Converted Loan Payments fields.

Informational

Converted Loan Payments

You must click Add to display fields here. This section allows you to enter the previous loan amounts, by source, that have been paid for the loan. You must continue to click Add to add an additional source line item for the loan. The following fields are required in this box:

·         Source: choose a/the source of money the converted loan was originally taken from

·         Original Amount: enter the original loan amount in that source for that loan

·         Paid Amount: enter the amount that has been paid at the prior provider for that loan in that source

Required

Loan Default tab

Default Date

The date the loan default transaction should be created.

Required

Tax Code

The tax code to be applied to the loan default. This is information that will be reported to the IRS.

Required

Calculate Interest

If you want to calculate interest on the loan, you should check this box then enter the following information:

·         Interest Start Date: Typically the last loan repayment date

·         Interest End Date: Typically the date of the loan default

·         Calculate Interest button: Click this button to calculate the interest

·         Calculated Interest Amount: This field only populates once the above fields have been entered, and indicates the loan interest amount.

Optional

Default Loan

Click this button to mark the loan as defaulted, and create a $0 loan default transaction.

Required

Loan Adjustment

Loan #

Confirm you are on the correct loan to adjust.

Informational

Accrual Rate

The interest rate that should be charged for the loan. Be sure to verify all Plan rules for any maximums that may apply.

Required

Fee Amount

This was the amount of the fee for the original loan.

Optional

Military Leave Start Date

This is the first date of the participant’s military leave. Once you click Save, the Loan Currently Suspended checkbox is automatically checked.

Required

Military Leave End Date

The date the participant’s military leave ended. Once you click Save, the Loan Currently Suspended checkbox is unchecked.

Required once this date has been reached

Military Leave First Payment Date

After the military leave end date has been reached, calculate the first date a loan payment should be received for the loan. You should factor in all current internal processes for this date.

Required

Principal Remaining

This reflects the principal remaining at the time military leave began.

Informational

Original Months Remaining

After the military leave loan has been recalculated, this field shows the new number of months the participant has to repay the loan.

Informational

Accrued Interest during suspension

The amount of interest that accrued during the participant’s military leave.

Informational

Recalculate Loan

Click this button to recalculate the loan, which will provide new dates of the loan.

Required

Override Loan Details

Req Amount

The amount for each source that is to be requested. In order for this field and tab to be available, you must click the Override Loan Details on the Transaction Information tab.

Required

Amount to allocate

The original amount requested for the loan.

Informational

Total Amount Allocated

The total amount already input in the Req Amount column.

Informational

Amount Left to Allocate

The amount left that needs to be allocated for the requested loan amount.

Informational