Form 5330 and Late Contributions

[Guest moorhan]

We have a client with late contributions to their plan. They correctly filed a Form 5330 but did not complete line 26a. We understood that late contributions were considered loans to the Plan Sponsor, but I recently heard from the plan's custodian that they were considered loans only of the plan sponsor's bank account went below the amount of the contribution. Is this so? What is your definition of discrete v. other?

Also, the plan's third party administrator believes that you only have to make a plan whole with regards to late contributions if the participants were hurt by the late contributions. I.e. if the market went down during the time the company held the participants' money, the participants were not hurt; therefore, the plan sponsor would only contribute the withholdings and not additional "lost" earnings. We understood that you must make the plan whole regardless of the market and pay the participants the going federal rate.

Any comments would be appreciated.