lost earnings on late LOAN deposits

[Earl]

I see that late deferral deposits requires an EPCRS filing.

Is that true of late loan deposits also?

[ETA Consulting LLC]

Loan payments, deferrals, & employee after-tax contributions are treated the same. They are all amounts withheld from employee paychecks and should be separated from Employer assets as soon as administratively feasible.

Good Luck!

[Tom Poje]

how late?

Technically (yes even if employer error) under EPCRS the only loan 'corrections' available are not under SCP but VCP. see sec 6.07

however, since most loans carry a grace period, if you are within that period I'd agree with the Toolkit.

[QDROphile]

If the standard is based on the idea that the employer is holding plan assets, then a payment grace periond is irrelevant under a system that uses payroll deduction for loan payments. The grace period relates to when the borrower must pay the loan to avoid adverse consenquences. The prohibited transaction clock starts on payday. At that point the employer holds the funds from withholding what otherwise would be paid to the employee (and the employee would pay on the loan). The employer is obligated to deliver the loan payment amount promptly rather than hold it (presumably for employer benefit). If the employe pays the plan directly, the late payment does not become plan assets and the grace period become relevant with respect to loan terms and consequences of late payment, including potential tax consenquences. I would argue that a late direct payment is not a plan assets issue -- it is simply a late payment.

[Kevin C]

If you are referring to the late deposit of loan payments withheld from paychecks, I think you are looking at the wrong correction program. The EPCRS loan corrections are for loans that don't satisfy 72(p). Late deposits are covered by the DOL's VFCP program, which includes a PT exemption if you comply with the program.

http://www.dol.gov/ebsa/compliance_assistance.html#section8

[Earl]

Agreed. DFVC was my intended refernce.

[J. Bringhurst]

But, you don't necessarily have to correct under VFCP...Filing of Form 5330 and payment of the 15% exchise tax is an alternate fix. Either way, the fix must be reported on Form 5500. (I assume this is a 401(k) plan rather than a 403(b) plan.)