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 we self-correct under EPCRS? 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.
- 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
- Impact of bankruptcy
- Impact of death
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
Speaker: David Schultz, J.D.
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