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View More FIS Relius Education Webcasts and Conferences

Dealing with Participant Loan Defaults

FIS Relius Education

Mar. 30, 2017

Recorded Online


Administering participant loans can be one of the most frustrating functions of retirement plan practice. Many practitioners would prefer to simply eliminate loans from the plan; yet, participant loans continue to be one of the most requested plan features.

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

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.

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

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