Dealing with Participant Loan Defaults

FIS Relius Education

Unfortunately, participant loan defaults are a relatively common occurrence. When a participant defaults on a loan, the plan must address the following issues: When did the default occur and can it be “cured”? Can I distribute the loan? What is the difference between a loan offset and a deemed distribution? How do I report a deemed distribution and a loan offset on Forms 1099-R and 5500? How do I account for the defaulted loan? This 60 minute seminar will address loan basics, in addition to these questions and others, such as: When is a defaulted loan a prohibited transaction? How do I correct a failure to withhold? If the employer fails to deposit the loan repayment is it a default? This seminar will provide you with a better understanding of how to administer loans properly.

Topics include:
• Loan requirements
• Avoiding prohibited transactions
• Avoiding “failed loans”
• Loan offset vs. deemed distribution
• Grace period
• Reporting defaults
◦ Phantom interest
◦ Offset following deemed distribution
• Loan acceleration
• Delinquent deposit of loan repayments
◦ Excise tax calculation
• Impact of bankruptcy
• Impact of death

Prerequisites:
There are no prerequisites or advance preparation for this program. However, the instructor will assume attendees are familiar with the basics of handling plan loans. At least 1 year of experience is recommended
Level: Intermediate.
Instructional Delivery Method: Group – Internet-Based
NASBA Field of Study: Taxes
Speaker: David Schultz, J.D.

Objectives:
After attending this Web seminar, an attendee should be able to:
• Determine the requirements for a valid participant loan
• Identify when a loan is in default
• Recognize the difference between a deemed distribution and loan offset
• Prepare the proper tax forms for a defaulted loan
• Explain the impact of bankruptcy or death on a participant loan

More Information, How to Register