Loan FAQs

[Top]How much can a participant borrow?

In general, the minimum amount to be borrowed is $1,000 and the maximum amount is 50 percent of the vested account value, up to $50,000. The maximum loan amount may be restricted to certain sources (as outlined in the loan procedures) and offset by other outstanding loans.

Daily account value fluctuations may affect the amount available for withdrawal. If the requested loan amount exceeds the amount available for withdrawal at the time of processing, the loan request will be processed for the maximum amount available.

Many plans restrict the total number of outstanding loans and the amount of time between the issuance of loans. See the plan’s loan procedures for details.

All loans must be adequately secured. For this purpose, the plan may consider a participant's vested interest under the plan to be adequate security. It shall be the policy of the plan not to make loans that require security other than the participant’s vested interest in the plan.

[Top]How long will the participant have to pay back a loan?

The loan duration must be for at least one year, but not more than five years. Loans for the purchase of primary residence may be from one to 30 years. The participant will be required to provide any supporting information deemed necessary by the plan administrator.

[Top]From which sources will the loan be withdrawn?

The source withdrawal sequence for the loan distribution is determined by the rules outlined in the loan procedures. Withdrawals will be made from the investment options on a pro-rata basis.

[Top]What interest rate will apply to the loan?

The plan administrator will establish a reasonable rate of interest, which will provide the plan with a return comparable to the rates being charged by lending institutions in the same geographic locale as the employer for loans made under similar circumstances. A loan will carry the same rate of interest throughout its term.

[Top]How will loan repayments be made?

Loan repayments will be made via payroll withholding, and the participant must enter into a payroll deduction agreement with the employer.

Repayment frequency is determined by the plan sponsor. Payroll deductions will commence within 30 days of the origination of the loan. Loan repayments will be due even during a leave of absence, payroll deduction is waived for the period of the leave, and repayments may be made via personal check, money order, or certified or cashier’s check to the plan. Loans may not be consolidated or refinanced.

All loans contain a demand feature requiring repayment in full upon the borrower's termination of employment (except for approved leaves of absence) or upon default. In the event of default, the plan administrator shall take such reasonable actions that a prudent fiduciary in like circumstances would take to protect and preserve plan assets. The plan administrator may grant the participant reasonable rights to cure any default, provided such actions would constitute a prudent and reasonable course of conduct for a commercial lender in like circumstances. The plan administrator may treat a loan that has been defaulted upon and not cured within a reasonable period of time as a deemed distribution from the plan, potentially subject to personal income tax.

[Top]Is there a charge for taking a loan?

Loan processing and/or Loan Administration Fees may apply. Please refer to the Loan Specifications page for additional information.

[Top]How soon will the participant receive a check?

The plan administrator and the participant will receive notification via e-mail (if provided) within two business days that the Promissory Note and Loan Repayment Schedule are available for viewing on the websites. If the plan provides for cash only as a distribution option at termination and/or retirement and the plan allows direct loan checks, the loan check will be sent regular mail directly to the participant’s mailing address. Otherwise, the loan paperwork and check will be sent regular mail to the plan administrator within five business days.

[Top]What forms need to be completed?

In addition to the online loan application, the spousal consent form may be required. This form gives spousal consent for the borrower's use of his or her accrued benefit in the plan to secure the borrower's loan obligations. If the form is required, it must be completed regardless of marital status. Unmarried borrowers must certify their marital status on the spousal consent form, and married borrowers must obtain their spouse's signature. The plan administrator or a notary public must witness the signature of the participant, and the signature of the spouse in the case of married participants. The plan administrator should keep this form for his or her files and does not need to mail a copy to AUL.

[Top]What happens if the participant cannot repay his or her loan or his or her employment status changes?

If so determined by the plan administrator, a default of a loan shall exist upon, but not be limited to, the occurrence of any of the following acts, events, or conditions:

• Nonpayment when due.
• Failure to maintain an automatic after-tax payroll deduction repayment arrangement, except for approved leaves of absence, provided a leave of absence (for reasons other than military service) does not last longer than one year and the borrower is either without pay or is being paid at a rate of pay less than the amount of the repayment required by the loan during the duration of the leave.
• The death of the borrower.
• The required spousal consent is revoked or otherwise becomes invalid or inoperative.
• Interruption of the borrower's status as a ‘party-in-interest' with respect to the plan.
• Impairment of the value or priority of the security interest pledged by the borrower.
• Termination of employment when the loan is not repaid in full, except for approved leaves of absence.
• Failure to make payment at the end of one year of an approved leave of absence for reasons other than military service.

[Top]Who should participants contact if they have additional questions?

Participants should contact their plan administrator with additional questions.