Loan defaults - to report on Sch. H & G?

[Guest Trirod]

I am trying to determine the meaning of the instructions to Line 4b of Schedule H - particularly the section that reads "Do not include participant loans made under an individual account plan with invesmtent experience segregated for each account that were made in accordance with 29CFR2550.408b-1 and secured solely by a portion of the participant's vested accrued benefit"

I have a client with a loan in a 401k plan that is technically in default (the participant stopped making repayments). The loan is for around $6,000 out of her total 401k vested balance of $14,000. Because the loan balance is effectively secured by the vested balance, does this mean that I do not have to report the delinquent loan as per the instructions? That somehow does not seem right to me, but it also seems to be what the instructions are telling me!

Thanks in advance

Rod

[JohnCheek]

If this loan is in default, it either has been reported as a deemed distribution, or it is within the grace period, but will be reported as a deemed distribution shortly. (The participant has received, or is about to receive, a Form 1099 for the defaulted loan.)

That's reported on Schedule H line 2g, and those loans that are "deemed distributed" are no longer included in plan assets on your ending balance sheet.

Therefore, those loans are not included in the Schedule G list of loans in default