Practice Management
ASPPA Connect now is running an occasional feature on correcting plan loan failures. The 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.
The new feature will discuss addressing plan loan failures in a variety of situations, including:
- waiting until grace period expiration to make corrections
- corrections after the 5-year repayment period has expired
- sporadic loan repayments
- grace period for 5-year repayment period
- the level amortization rule
- late deposit of loan repayments
- limiting loans to active participants
- prohibited transaction excise tax
- 5-year loan term
- Voluntary Fiduciary Correction Program
- seasonal employees
- loan offsets
- loan repayments withheld but not deposited
- using ACH to repay participant loans
- self-correction
Click here to view the entire list. The first of this series follows.
Waiting Until Grace Period Expiration
Q. In the case of delinquent payments, must an employer wait until the end of the grace period to correct the loan default by reamortizing the loan?
A. If the plan document or loan policy provides for a grace period, the plan should not proceed with correction (reamortization) until the grace period expires. With the cooperation of the participant, the IRS may not challenge a correction that begins before the grace period expires.
Editor’s Note: 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.
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