Hi - We have a plan which gave a loan out to an employee who promptly did not make one payment. So the loan is now in default. When do the earnings stop accruing? At the end of the cure period or do we continue to accrue intil we deem the distribution?

I have another question about defaulted loans. We have a plan which had a loan that defaulted. The 1099R was never issued since the trustee did not wish to have one issued. It has been a couple of years now. How long can we keep advising him about the loan in default & that a 1099R needs to be issued before there is a problem? Is there a program we can refer him to to take care of this issue?

Thanks for any insight or direction!

Interest stops accruing when the loan is paid or distributed. A deemed distribution does not affect the loan itself. However, the deemed distribution will cause subsequent loan payments to be counted as after-tax amounts.

So if I have a loan that has not been paid or deemed, it should be still accring interest?

That is correct.