Loan past the 5 Years?

[PFranckowiak]

Need some help. I need to reply to an attorney - Situation.

1. Participant was thought to be terminated, but in fact went to Part time. Company stopped withholding loan payments.

This happend in July. Plan allows participant to make payments by check.

2. Attorney said he had until December 31 to make up the last quarters payments Aug/Sept or the Loan will be indefault.

(Plan has 3 month grace period) One of the loans have it's 5 year date 12/4/ 2010. Attorney said if he makes the payments through September - he is making quarterly payments and the grace period would postpone the default until 2011 (better tax year for the participant as he will have less income)

My research has come up with the Treasury Regs 72(p) don't really address the problem above. It states that the cure period cannot extend beyond the last day of the calendar quarter following the calendar quarter in which the missed installment payment was due. I found something about the IRA Q&A with ABA on 5/9/2003 that said the IRS says that the Cure (grace) Period can apply to the last loan payment, even if that payment is due at the end of the 5 year period.

Anything newer???

Are we okay not defaulting the 5 year loan until 2011???

Pat

[Bird]

If all payments due before Sept 30 are paid by Dec 31, then I would not default as of Dec 31. If any payments due by Dec 31 are not paid by Mar 31, then I would default as of Mar 31. The original 5 year last payment date is not relevant to the discussion, IMO.