Cure Period

[Randy Watson]

Our participant loan policy has a cure period for missed payments. Under the cure period, missed payments must be made by the end of the calendar quarter following the calendar quarter in which the payment was missed. This cure period is in compliance with the participant loan regulations (1.72(p)-1,Q&A10). However, what happens when the application of this cure period extends the due date of the missed payment beyond the end of the original amortization period? For example, a participant fails to make his last payment. The cure period would enable that participant to make up the payment long after the 5-year period required by Code Section 72(p)(2)©. Does anyone have any thoughts on this or know of any authority that addresses this issue? Thank you.

[Guest ERISA_kid]

Take a look at the following guidance. This is exactly your situation.

ABA Section of Taxation May Meeting 2003

[Guest ERISA_kid]

Take a look at Q&A #1 on the above link. The Service indicates that a remedial payment within the cure period will qualify even though made after expiration of the five-year term.

[Randy Watson]

That's perfect. Thanks!