Correcting Late Payment of a Loan (with a twist)

[ERISA-Bubs]

We have a typical situation where a participant went delinquent on his loan.  We would normally correct by reamortizing the loan over the remainder of the loan term, but in this case, the loan term (which is the statutory term) is recently expired.  According to EPCRS, if the statutory loan term is expired, the loan should be treated as a deemed distribution, not corrected according to the correction procedure.

The problem is, we are a big cause of the delinquency.  The 401(k) Plan under which the loan was granted was terminated (in connection with the employer/plan sponsor being acquired).  The purchaser in the transaction is allowing all plan loans under the 401(k) Plan to be transferred to the purchaser's plan.  Payment of loans was put on hold during the transition, the loan went into default, and now the loan term is expired.  The Loan currently sits in the purchaser's plan, in default, and now past its term.

Is there anything we can do?

[ERISA-Bubs]

Just to add a bit of context, the remaining loan balance is a little above $2,000.  The VCP user fee (in this case) would exceed that amount.  So, we are hoping for some sort of solution that would involve SCP, but which is still allowable under the correction procedures.

[Luke Bailey]

ERISA-Bubs, which calendar quarter was the last missed payment in?