Rev Proc 2019-19 and delinquent loans

Under Rev Proc 2019-19, can we can correct a delinquent loan that has not yet been defaulted?  The Rev Proc says that a “defaulted loan” is any loan that is not repaid in accordance with plan terms.  Can SCP be used to correct a loan in which several loan payments were missed because the employer’s payroll messed up and failed to withhold the loan deductions?  The cure period has not expired so there is no default yet. 

The question arises because the Rev Proc states that it applies to “defaulted loans” and does not mention delinquent loans.  My thought is that the term “defaulted loan” is being used differently than the conventional definition in the Rev. Proc. and we may correct a delinquent loan.

Thanks in advance for any thoughts.

Rev. Proc. 2019-19, Section 6.07(d) states:  Defaulted loans. A failure to repay a loan in accordance with loan terms that satisfy § 72(p)(2) may be corrected by (i) a single-sum corrective payment equal to the amount that the affected participant would have paid to the plan if there had been no failure to repay the plan, plus interest accrued on the missed payments, (ii) reamortizing the outstanding balance of the loan, including accrued interest, over the remaining payment schedule of the original term of the loan or the period remaining had the loan been amortized over the maximum period that complies with § 72(p)(2)(B), as measured from the original date of the loan, or (iii) any combination of (i) or (ii).

ERISApedia has a webinar coming up next month specifically on Loan Corrections under the new Rev Proc. 

It's free, so I'd suggest registering for it, and if possible, submitting your question ahead of time, which will give it a better chance of being addressed. 
Though if you need an answer sooner - folks here will likely chime in. 

Even prior to the new Rev Proc, my understanding was that late loan payments could be caught up (with any extra interest if needed) as long as it was still within the cure period. I don't believe that has changed. 

I agree with justanotheradmin.  You're overthinking it.  Late payments can be made up within the cure period, with or without the new Rev Proc.

I agree with all of the above, but think technically it depends on the cure period under your loan policy. Delaying the deemed distribution date (which I think Rev. Proc. 2019-19 views as the default date for the "defaulted loan") until the end of the quarter following the quarter of first missed payment is permissive under Treas. reg. sec. 1.72(p), Q&A-10. Assuming your loan policy does include the grace period (and I don't recall seeing any that did not), the loan is not a "defaulted loan" until the expiration of the quarter following quarter of missed payment, so you can catch up the payments and it's not even a "correction" for purposes of EPCRS because no rule of Code or regs has yet been violated.

16 hours ago, Luke Bailey said:

Assuming your loan policy does include the grace period (and I don't recall seeing any that did not)

I don't think I have seen one without a cure period, but I have seen shorter cure periods than the maximum (like end of the month following).

I think we all agree that the cure period allows them to catch up on the loan payments, so for that reason the terminology in the Rev Proc is irrelevant. The question for me is whether that is their only option.  Under the Rev Proc, you could also reamortize the loan over the remaining payments, but I'm not sure if that is an option under most loan policies.  If it is not available until after default, it gets a little trickier.  

Rev. Proc. 2019-19 6.08 says that EPCRS correction methods are generally not available if the failure can be corrected under the Code and related regulations.  So, correction during the cure period can not be done under EPCRS. 

1.72(p)-1 Q&A 20 allows a loan to be refinanced.  If it is done during the cure period allowed by Q&A 10 and the re-formed loan complies with 72(p), default would be avoided.  Q&A 10 refers to the missed installment being made during the cure period.  Refinancing the loan changes the amount of the installment that is due and makes the payments current at the point of the refinancing.  Our loan program specifically allows refinancing. I don't remember seeing any other loan programs that prohibited it, but I don't think I would have been looking for that.

My document defaults to allow refinancing (subject to IRS regs) but with an option to not allow it.  I haven't looked for it either but I'm sure there are some out there.