jmartin Posted September 4, 2019 Posted September 4, 2019 We have a plan that allows for two loans. A participant was mistakenly allowed a third loan. The loan policy specifically states that loan re negotiations are not allowed. Assume the participant cannot pay the third loan back in full nor do they want to default and claim on taxes. Are their any other options available? Can we still merge two loans together since it is for a correction despite the loan policy? Could we amend the loan policy to allow loan renegotiation? then amend again "to go back" say a month or two later? VCP?
C. B. Zeller Posted September 5, 2019 Posted September 5, 2019 You can self-correct by retroactively amending to allow 3 loans. Rev. Proc. 2019-19 addresses this. ugueth and rr_sphr 2 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co
imchipbrown Posted September 5, 2019 Posted September 5, 2019 Is the "loan policy" in the Plan Document or is it referred to by the Plan Document? I've always had a "Loan Policy" that was separate from the Plan Document. The Plan Document Adoption Agreement would simply ask "Are Plan loans allowed?" ( ) Y/N.
CJ Allen Posted September 9, 2019 Posted September 9, 2019 retroactive amendment or payment of lowest balance loan -- leaving 2 loans -- as corrective measure. ERPA
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