loan question

[Guest mab]

Say you have a client who has plan participants with loans. The participants are supposed to make timely loan payments. For the most part they do but one or two get posted late during the term of the loan. As a result, there is a de minimis amount of interest on the books $5-$25 when the loan is thought to be satisfied by the plan participant. Can I wipe this out, must I force the participant to pay this amount (and receive the ensuing gripes from the client), or do I have to 1099-R the participant for the amount. Tx for any assistance.

[mbozek]

Simple Question : Whose fault is it that the loan was posted late? The employer? If the loan payments were made on time ( by salary reduction) then the ee cannot be held laible for late posting, interest, etc. Just wipe out the charges.

[Guest mab]

Yes,

It is the employer 90% of the time who is the "tardy" party in forwarding the payments to the plan administrator. Do you have any statutory authority that allows this de minimis amount to be wiped off without liability flowing to any party, including the plan administrator doing the "wiping off". Tx.

[rcline46]

The loan was paid on time. It should have a posting date on time. In my opinion, the entity posting the loan payment made the mistake and they are just correcting the mistake.

[mbozek]

It is a matter of equity and administrative discretion. Clearly the participant is not liable becuase the loan payment was deposited on time. And the employer payment would be considered a contribution to the plan for the participants account.