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Dealing with Participant Loan Defaults [2019]

FIS Relius Education

Mar. 20, 2019
12:00 p.m. ET

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.

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

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.

Continue by clicking on the following link:

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