5500-SF Line 8e certain deemed distributions

[Guest AP914]

For a participant who has an outstanding loan and they terminate and take full distribution should the outstanding loan be reported on line 8e or included with the benefits paid on line 8d?

Example, participant balance is $40,000 including an outstanding loan of $5,000. The participant terminates and does not pay back the outstanding balance but rather takes his remaining account balance of $35,000. Should we report $35,000 on line 8d and $5,000 on 8e, or just $40,000 on 8d, or do it a different way?

Thank you in advance for any thoughts and opinions!

[Tom Poje]

think of it this way:

deemed distributions means the 'distribution' took place even though there was not a distributable event.

so a person who is active generally can't get $ out of the plan because there is no event such as termination, in service, etc. so a defaulted loan falls into this category.

in your example, the person has terminated, which, in most plans would be a distributable event so that would be treated as a benefit paid (even though they received nothing more at this time - they did receive it earlier in the form of a loan)