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Is there anything in the loan procedure paperwork or signed loan documents that addresses non-payment and/or balance at termination? It sounds like the recordkeeper defaulted it as they should. I don't see how you can correct back almost 2 years of no payments/default now... Just an opinion -- these types of situations always have me shaking my head....I always wonder why the participant didn't notice the absence of the loan payment deductions from his paychecks and say something at the time? I guess they are just hoping it will go away, be the employer's fault and somehow miraculously there will be no bad consequences for them and it will be a $30K bonus? And who on the employer/payroll side misses a years worth of loan payments? I would be doing a large scale audit of all loans to figure out where and how this was missed.

I agree with Lou in that I don't know what you're trying to correct (though there are plenty of plans that dictate the timing of the default in this way.) But I think it's too late for the participant to undo it all. If there were a bona fide error, the ER could correct the 1099-R and reissue it, but that doesn't seem to be the case here. --- Edited to fix typo

I'd love to see a redacted copy of what you get from your client. 99 and 44/100 % likely a scam.

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You should consult the DOL abandoned plan rules and how to terminate an abandoned plan. 29 CFR 2578.1

To be on the safe side, you might want to look up a proper IRS number to call and use that number to see if this is legitimate. You will probably not want to try calling any numbers shown on what nearly everyone here feels may be a scam. If it is, the IRS probably wants to get this contact investigated. Given the strained resources the IRS currently has, investigatory reviews of 2005 Form 5500 filings appear to be most unlikely!

HI All, I will post it today. Very interesting letter.

Me, too, please!

How does a deceased person change their mind? I'm assuming you mean the beneficiary took the distribution in cash. I'm pretty sure they can still rollover to an Inherited-IRA if they are in the 60 day window.

Since when does IRS make "changes" to a 5500? They either threaten you with penalties because it is incomplete in some fashion, or they pull the plan for examination. That's what is suspicious to me.

When a partial termination appears to have occurred, it is always a good idea to cover vesting through an amendment, since otherwise it is not necessarily clear that even those displaced have been fully vested. Note that when a defined benefit plan freezes all accruals, that could be considered a partial termination. To freeze benefit accruals, of course, there must always be a plan amendment. When freezing accruals, it is a really good idea to freeze plan entry, and since the freeze could be a partial termination, it is also a really good idea to grant full vesting to all those still employed on the freeze date. Some provisions concerning rehires may also be a good idea, so if a participant who had terminated before the freeze is later rehired, it will be clear what is to be done. For example, if someone had terminated with 40% vesting, was not active on the freeze date, and was subsequently rehired, what will be done with respect to the 60% of the pre-break accrued benefit that was not vested?