QUESTION: We have several 401(k) plan participants who have been called to active military service and would like to suspend their plan loan repayments during their military leave. Do the rules for suspending loan repayments during a regular leave of absence apply to military leave?

ANSWER: The rules for suspending loan repayments during a military leave of absence are broader and more flexible than for a regular leave of absence. For a regular leave, the maximum payment suspension period is one year, and the entire loan must be repaid within the maximum permissible term (five years, for loans other than those for a principal residence). For a military leave, however, your 401(k) plan may permit suspension of loan repayments for the entire period of the military leave even if that period exceeds one year, and the term of the loan may be extended to the maximum permissible term of the loan plus the period of military leave. But it is important to remember that interest on the outstanding loan would continue to accrue during the military leave suspension period.

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