I took out a 401(k) loan in December 2015 and have been making semi-monthly loan payments through payroll deduction ever since. My boss, whose responsibility it is to upload a report to our plan administrator that shows all employee contributions and loan payments), received the reports on a timely basis (I know this because I do payroll and I provide him with the reports myself) but failed to upload the reports in a timely manner. Some of the reports were uploaded as much as two months after the payroll date. As a result, my loan was called into default and declared a distribution. I somehow missed the 1099 that was issued at the end of 2017 (I never open my statements and I assume I tossed it thinking it was just another statement) and I did not become aware of the default until I recently logged on to change some of the investment options on my plan balance.
I have made two of the partners at my firm aware of this and I need to determine exactly what the financial ramifications will be for me (the amount shown on the 1099 is $12,810.69, although the balance is less than that since I have continued to make my scheduled payments). The firm will have to make me whole, and I believe they will, but I need to know just exactly what this is going to cost me. I also need to know what my firm is facing in terms of penalties because there are at least three other outstanding loans that were probably also defaulted, not to mention the 401(k) contributions that were not posted to accounts in a timely manner. Employees will have lost out on interest since their contributions were not credited for as long as two months after they should have been.
I am trying to arm myself with as much information as I can. Can anyone offer insight? Many thanks.
