Loan issues

[Lori H]

Loan defaulted 6/30/10 to an active participant. appx balance was $2100. 1099 was not issued. 15 participant plan only allows for 1 loan at a time. In Oct 2010, participant completed paperwork to issue another loan for $2000 and stated on paperwork that she had no outstanding loan. She is current on this loan. I understand a defaulted loan restricts the possibility of future loans. The plan sponsor is of the opinion that he will just send in the loan payments on the defaulted loan to get it current. Inexplicably, Paychex just quit with holding loan payments on the participants loan, so therefore I doubt the participant could just "make up" the missing loan payments even if that was an option. Should the plan sponsor submit a VCP filing and perhaps request a 2011 1099-R issued for the defaulted loan and request that the plan be amended retroactively to allow for 2 loans?

Oh and the sponsor did not file their 2009 calendar year 5500 electronically. Hello DFVC