Reporting plan loan payments as contribution?

[thepensionmaven]

Plan has loan feature, 2019 first year any loans.

Looking at the fundholder annual report, is reflecting loan repayments in the total contribution made during the year.  Is this correct?

[Larry Starr]

2 hours ago, thepensionmaven said:

Plan has loan feature, 2019 first year any loans.

Looking at the fundholder annual report, is reflecting loan repayments in the total contribution made during the year.  Is this correct?

Maybe I don't understand the question.  You know a loan repayment is NOT an employer or employee CONTRIBUTION to the plan.  It is the replacement of one asset (loan receivable amount) with another (cash).  Now, I don't really care how the "fundholder" shows anything so long as it has nothing to do with how the plan is administered and how that loan payment is properly accounted for in the plan records/record-keeping. I guess I would prefer that they properly reflect it if they can, but otherwise we will adjust for their poor explanation.

[Pam Shoup]

This is not correct.  Loan payments should show up as their own type of transaction.  Depending upon the software, it may be listed actually as a loan payment or a transfer out of the loan source/transfer into the funds or some other way.  When the loan payment is showing up in the contribution column, either the report provided by the payroll system was faulty, or the firm that processed the transaction(s) did not process them correctly.  With that being said, it may be next to impossible to have the transaction re-processed.  If the loan payment (contribution) was made to the originating source of the loan, it is not going to make any difference on your ending balances by source.  You will need to back out the loan payment(s) from the total contribution to determine the actual contributions to the plan.  If the contribution/loan payment is made to an incorrect source, then the transaction will need to be re-processed.  For example, if the loan was originally withdrawn from the profit sharing source, but the loan payment (contribution) was made to the deferral source, this will cause a whole host of issues, including determining hardship available amounts and then there's that whole thing about not re-characterizing money . . . 

[Bird]

It really depends on what the "fundholder" is expected to do.  If it's a full-blown recordkeeping system, then it sounds like deposits were coded incorrectly, or that it's really a half-blow system that the TPA will have to adapt to and deal with.  If it's just a brokerage account or similar basic investment vehicle, then of course the "fundholder" has no capacity to code things other than as "contributions" and the grown-ups have to figure it all out. 

i.e. pretty much what Larry said; I'm not really disagreeing with Pam Shoup but I think that post assumes a certain system that may not exist.

[Larry Starr]

4 hours ago, Bird said:

It really depends on what the "fundholder" is expected to do.  If it's a full-blown recordkeeping system, then it sounds like deposits were coded incorrectly, or that it's really a half-blow system that the TPA will have to adapt to and deal with.  If it's just a brokerage account or similar basic investment vehicle, then of course the "fundholder" has no capacity to code things other than as "contributions" and the grown-ups have to figure it all out. 

i.e. pretty much what Larry said; I'm not really disagreeing with Pam Shoup but I think that post assumes a certain system that may not exist.

Love the grown ups reference! ?