Loan Payment Delay

[RatherBeGolfing]

7 minutes ago, Bird said:

I think the word "and" italicized above has critical meaning here.

It does.  It means you get to add the delayed period to the remaining term and add accrued interest.  This also tracks with the IRS guidance in Notice 2005-92 in regards to KETRA 103 which is pretty much identical to 2202(b)

[susieQ]

My interpretation is that the Act is not identifying which payments can be suspended when it references "payments due March 27, 2020 through December 31, 2020." Rather it is indicating at which payment (point), the one year delay can begin.  I assume it is taking into account that Participants will likely fall behind in ability to pay at different points in time.  For some,  they can no longer pay in April, 2020 and others may not encounter an issue until December, 2020.  So if the suspension starts April, 2020, repayment restarts in April, 2021. If suspension is started in December 2020, then repayment restarts in December 2021.  

[k man]

6 hours ago, MoJo said:

I can read.  Plain language.  It's how I was taught in law school to read statutes.  The Act specifically says "payments due" in 2020.  Says nothing about payments due in 2021.  Words have meaning, and the absence of words has meaning as well.

it makes no sense to do it this way.

[k man]

1 hour ago, susieQ said:

My interpretation is that the Act is not identifying which payments can be suspended when it references "payments due March 27, 2020 through December 31, 2020." Rather it is indicating at which payment (point), the one year delay can begin.  I assume it is taking into account that Participants will likely fall behind in ability to pay at different points in time.  For some,  they can no longer pay in April, 2020 and others may not encounter an issue until December, 2020.  So if the suspension starts April, 2020, repayment restarts in April, 2021. If suspension is started in December 2020, then repayment restarts in December 2021.  

i agree with this. it is the only logical interpretation.  

[MoJo]

1 minute ago, k man said:

it makes no sense to do it this way.

So?  Ever read other statutes?  Congress has no concept of how plans are operated.

[k man]

 
        (2) Delay of repayment.--In the case of a qualified individual 
    with an outstanding loan (on or after the date of the enactment of 
    this Act) from a qualified employer plan (as defined in section 
    72(p)(4) of the Internal Revenue Code of 1986)--
            (A) if the due date pursuant to subparagraph (B) or (C) of 
        section 72(p)(2) of such Code for any repayment with respect to 
        such loan occurs during the period beginning on the date of the 
        enactment of this Act and ending on December 31, 2020, such due 
        date shall be delayed for 1 year,
            (B) any subsequent repayments with respect to any such loan 
        shall be appropriately adjusted to reflect the delay in the due 
        date under subparagraph (A) and any interest accruing during 
        such delay, and
            (C) in determining the 5-year period and the term of a loan 
        under subparagraph (B) or (C) of section 72(p)(2) of such Code, 
        the period described in subparagraph (A) of this paragraph 
        shall be disregarded.

 

under (A) You delay payments due until December 31 for one year

under (B) you adjust subsequent loans repayments  to reflect the delay. i read that to mean you adjust all future payments back one year. 

it just makes no sense to do it the other way. frankly who is going to complain if you interpret it either way?

[RatherBeGolfing]

36 minutes ago, k man said:

it makes no sense to do it this way.

That is how IRS interpreted KETRA...

[RatherBeGolfing]

23 minutes ago, k man said:

. i read that to mean you adjust all future payments back one year. 

Then (A) is pointless, and that is just not how statutes are drafted

[k man]

2 minutes ago, RatherBeGolfing said:

Then (A) is pointless, and that is just not how statutes are drafted

A says you have until december 31 to delay. B says ALL  subsequent payments  are adjusted to reflect the one year delay.   if you do it the other way you aren't delaying all subsequent payments are you?

[RatherBeGolfing]

35 minutes ago, k man said:

A says you have until december 31 to delay

It says if the due date for a payment occurs between enactment and December 31, 2020, such due date shall be delayed for a year.  The language is very clear.  Nowhere does it say say you have until December 31 to delay

Quote

(A)if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the date of the enactment of this Act and ending on December 31, 2020, such due date shall be delayed for 1 year

 

42 minutes ago, k man said:

B says ALL  subsequent payments  are adjusted to reflect the one year delay.

Really?  Where do you see "all"? Where do you see "one year delay"?

Quote

any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under subparagraph (A) and any interest accruing during such delay, and

 

[Mike Preston]

Doesn't "any" mean "any and all"?

[RatherBeGolfing]

2 hours ago, Mike Preston said:

Doesn't "any" mean "any and all"?

"any and all" is one of those old legal doublets they teach you not to use anymore.  They usually mean the same or close to the same, and they want you to use the most appropriate single word instead.  I'd say any refers to an unknown number. It could be one, a subset, or all.  All refers to... all, or every one.

If the intent was to define all repayments, they would have used all rather than any.  

[thepensionmaven]

Oy vay, I've read  and studied the whole string several times and still confused.

The conversation above mentions that after the suspension, the first payment to begin one year after the date of last payment, which would be April, 2021; the another portion of the string mentions repayments need to be restarted 1/1/2021.

The following has definitely resulted in a deemed distribution, but here is the scenario:

Participant suspends loan April 1, 2020, at that time outstanding balance was $x.

Despite more than many attempts to get her to start repaying, the client for whatever reason, never got around to entering into payroll.  The payroll company also mentioned several times.

Client just informed us that loan repayments recommenced September 1 of this year for the same repayment amount as pre-COVID suspension.

At this point, a reamortization of the reamortization as well as a recalculation of the amount of deemed distribution is necessary, but we are at a loss as to the start  date - 1/1/2021 or 4/1/2021 to run the additional 12 months.

A good reason not to have a loan provision in a plan.

[thepensionmaven]

My question is - and I am just checking the insurance company calculation - payments stopped 4/1/20 and resumed 9/17/21.

Does the reamortization start with the April 1, 2021 payment and run for 6 years; or start 1/1/21?

[C. B. Zeller]

About 2 months after this thread happened, the IRS released Notice 2020-50 which explained how they want loans that were suspended under the CARES Act to be handled. The notice provided a safe harbor which was to have repayments commence on 1/1/2021 and re-amortize the loan over the original term plus 1 year. They acknowledged in the notice that there may be other reasonable methods of handling it as well.