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Participant Loan in Default or not due to CARES Act relief


cheersmate

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Question: is the following loan in default or still within a correction period?

Participant took a loan in 4th Quarter 2020 and repayments were to commence via payroll withholding, 1st payment late December 2020, 5 Year repayment.

Assuming this Participant is a Qualified Individual under CARES, loan repayments could be delayed until January 2021 at which point the loan balance plus interest could be re-amortized for a new 5 years. To date, the Participant has not made any loan repayments.  Under this scenario is the cure period June 30 2021, for at least all missed loan payments January 2021 through March 31, 2021?

Thank you.

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Assuming that the plan uses the maximum permissible cure period then I believe you are correct.

Given the flexibility for self-correction of loans under the current version of EPCRS, they could probably restart payments and keep the loan going even if the cure period had expired.

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

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7 minutes ago, C. B. Zeller said:

Assuming that the plan uses the maximum permissible cure period then I believe you are correct.

Given the flexibility for self-correction of loans under the current version of EPCRS, they could probably restart payments and keep the loan going even if the cure period had expired.

Thank you C B Zeller.  I am not sure I understand your second comment. Could you please restate it or expound on it.  Thank you.

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See section 6.07 of rev proc 2019-19

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

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