RatherBeGolfing

don't you have to re-amortize all the payments where the cure period has expired though? I don't think we get around the amortization problem by a lumpsum of payments if they are outside the individual payments cure period, can we?

Correct. Before the SCP option, you had to go through VCP in order to issue a 1099 in the year of correction rather than the year it actually deemed.

I missed the part of it being the same loan... So, the loan defaulted in 2018 and should have been a deemed distribution in 2018. Under EPCRS, you can deem it in 2019 and issue a 2019 1099-R rather than go back to 2018. You don't have to deem it in 2019 though, you could still issue a 2018 1099-R. For the second part of the question, what I was saying was that the cure period does not actually extend the loan. If your last payment is due on the 5 year day, and the payment is made 30 days after that, you still have not exceeded the 5 year maximum. In your case though, we are already past the 5 year mark. I dont think you can correct by re-amortizing retroactively. In other words, if your correction is to re-amortize and pay the loan off in order to avoid a deemed distribution, that new payoff date cant fall outside of the 5 year window because your scheduled payment exceeds the maximum term. You cant correct by saying I will pay a lumpsum 30 days ago but since we are still within the cure period I can deposit today. If you had a day left on the maximum term, you could correct by saying pay the lumpsum tomorrow, but actually make the deposit within the cure period and be ok. Does that make more sense?

Yea I tend to agree. If a 2018 payment was missed and not corrected during the cure period, the loan should be defaulted. You could still correct it it through EPCRS tho. Most likely yes. The cure period and the term of the loan are two separate issues. IRS has informally agreed with this position at a past ASPPA Annual Q&A.

I have never had that issue with filings before, but I have had that issue in the past. As it was somewhat recently explained to me by the folks at USPS, tracking is done by scanning at each stop on route to the final destination. The barcodes sometimes get messed up and which means that it does not get logged at the stops or final destination. The problem is that it is also possible that the item has been lost. There is no way to know without further investigation which includes USPS contacting the recipient at the final destination. It is a loooooooong process. With time remaining, I would send a new batch. Even if both get there it wont be a problem.

Who says you cant mail them in one envelope? Its common practice and as far as I am aware there is nothing in the instructions that prohibits it. You just have to list each plan on a separate 5558 and while many include a list of the plans included for record purposes the IRS will either toss or return it.

Usually the person who issues the legal opinion knows what issues are involved or research the relevant legal issues... I would not feel comfortable with an attorney who does not know this practice area well enough to know what points should be addressed.

The TPA should know. If it doesnt, or does not at least know what looks questionable, it's a problem. I come from a small TPA, now ERISA department at a larger tax and consulting firm, and it's the same, we always know.

Well not quite. VCP (or SCP) as part of EPCRS corrects the operational failure, but not the prohibited transaction, which is cured by filing VFCP with DOL. So they are really not different versions, they are different programs with similar names that sometimes work with each other.

@Below Ground, I'm going to have to blame my last post on jet lag... The VCP requirement for a no action letter is for the correction of loan failures, not late deferral deposits. What I suspect happened in your case was that you had late deferrals (an operational failure) that you fixed through SCP and paid the excise tax. The DOL then sent one of their "invitation letters" to go through VFCP (not VCP) to correct the prohibited transaction and get a "no action letter". The DOL VFCP (no user fee) and the IRS VCP (user fee) sometimes work together but are different programs correcting.

Yes, but... It is more accurate to say that there is no additional filing fee. If you want a DOL no action letter for your late deposits you need to go through the IRS (VCP) first. It's not an IRS or DOL choice, it's IRS then DOL. This is why some will opt to forego the new SCP option in Rev Proc 2019-19. Without VCP there is no "no action letter".

I don't see why it wouldn't be suitable. 6.02 also says the correction method has to be reasonable and appropriate, that you could have more than one reasonable method, and that the methods in the appendix are deemed reasonable. As long as you consider all the principles for determining whether a method is reasonable (6.02(2)(a)-(e)) you should be fine.

I will bet anything that the paychex document does not distinguish between earned/paid. I don't think paid or earned matters for yor purposes though. He earned 6/1-6/10, he will get paid on 6/7 and 6/14. The last paycheck hits after he terminates its still payed and earned while a participant (just not active anymore) I have seen many variations on this question but it usually questions whether its eligible comp for the next year even though there are no hours of service. Its earned in 2018, paid in 2019 (on the 2019 w-2), but since the employee terminated in 2018 he/she will have 0 hours of service for 2019. Even with that variation the answer is always yes it counts.

Looking at your amortization table, use the ending balance that corresponds to the number of payments you have made.

Current balance. Since its a new loan, the interest hasn't accrued yet. Do you have something like an amortization schedule for the loan detailing balance and payment details?

$390k You can report on either cash or accrual basis as long as you are consistent. If you use cash basis then its only contributions before the end of the plan year. Using accrual basis you report contributions made on behalf of the plan year, even if they are actually deposited in the next calendar year. Most people report contributions made on behalf of the plan year because it lines up with the deductions. In this case, $3k is reported for 2018 even though the deposit was in 2019. The loan balance at the end of the plan year.

It generally isn't an issue for a 3% SHNEC. With match you have more variables that can cause significant differences between payroll calculations and annual calculations. If you take 3% on a payroll basis, it should add up to 3% on an annual basis. You might have penny adjustments for rounding, but that's about it. The bigger problem when doing it on a payroll basis is making sure you have a backstop for the comp limit. In other words, if they are simply doing 3% of payroll comp, make sure you have measures in place to cap it at $8,400 (3% of $280,000).

No need to debate it again, the premise of OPs question was not whether or not you could prevent the participant from stopping payroll deductions for loan payments. The question was if you cant prevent them from stopping payroll deductions, do you have to provide them with another option for repayment. I think we can agree that the plan is under no obligation to provide an alternative repayment option.

The plan/employer CANNOT withhold voluntary payroll deductions without authorization or after authorization has been withdrawn. The plan CAN dictate how loan payments are made, for example, only through payroll deduction.

@Luke Bailey, doesn't that raise the question of whether a plan fiduciary who approves an "invest in the world" self directed plan has met the requirements of 404(a)(1)(B)? The plan fiduciaries still have to responsibilities to approve (at least in some sense), monitor, designate DIAs, and make disclosures related to the participant's investment direction.

Unless it's one of those "limited to deferrals plus 6% in K plan" deals...

I've done quite a few over the last 10 years and I have not seen a direct link between late contributions on the 5500 and a DOL investigation. I always recommend VFCP as well, but even the clients that opt against it have been (mostly) investigation free. That's not to say that it can't lead to an investigation, but I think it's more likely that they look for more than just "[X] yes...". If there is a pattern, significant amounts, which regional office the client falls under, and even who the service provider is all matters more than an answer on the 5500.

My issue with this is that the participant wants to prepay loan payments rather than make a prepayment on the loan itself. It might sound like a distinction without a difference but it seems like it should matter... Most loan programs I have looked at allow for prepayment. some only allow for full prepayment, but most allow for full and partial prepayment. But prepayment usually means that you pay off the loan earlier than the original maturity date of the loan. Basically its applied on the back end of the loan. In this instance, the participant wants to make a prepayment, keep the original maturity date, but skip the next 5 payments. While I haven't seen a policy that actually allows for that situation, I don't think I have seen one that specifically prohibits it either. If a change to the policy is made, or an interpretation of the existing policy made, I don't think im comfortable skipping the regularly scheduled payments and just applying the pre payment. Maybe if there was a good reason for it, like someone is going on leave or having surgery or dealing with a sick relative for a period time...

Correct. it basically means that the participant will not need to take action to receive payment of any funds in the account because it has been paid or reserved for scheduled payment.

Not ideal but depending on RK, personal check to RK or employer to deposit for existing loans and then terminate loans going forward. Could be an issue if existing loan is an HCE though...