Loan defaulted/deemed distributed as if terminated but still works PRN

AN  employee has quit working except for PRN but had been full-time and  qualified for the retirement plan - took a loan and stopped paying on it when he went PRN  - the asset platform is wanting guidance on whether the loan should be deemed distributed or just in default and accrue interest on it?   If he is PRN then is he  technically terminated if they pay him wages and not 1099 misc.?  What are your thoughts on how this loan should be handled and reported.  Thanks!

1 hour ago, Pammie57 said:

AN  employee has quit working except for PRN but had been full-time and  qualified for the retirement plan - took a loan and stopped paying on it when he went PRN  - the asset platform is wanting guidance on whether the loan should be deemed distributed or just in default and accrue interest on it?   If he is PRN then is he  technically terminated if they pay him wages and not 1099 misc.?  What are your thoughts on how this loan should be handled and reported.  Thanks!

I think you should tell us what PRN means; don't assume abbreviations are understood.  Do like they do in good reporting; expand it the first time; your reader shouldn't have to google it to understand your question.  Google shows this: p.r.n.: Abbreviation meaning "when necessary" (from the Latin "pro re nata", for an occasion that has arisen, as circumstances require, as needed).

So, this is the problem of an employee who has quit working (let's say he retired) but comes back sometimes to help out.  Each time he comes back he is a rehired and needs to be treated as such. If he is past NRA, then he's also going to accrue benefits in almost every plan, regardless of the number of hours he works.  You need to treat him as a rehire, and depending on the amount of time between his termination date and his rehire date, you act accordingly on the loan. QED!?

Thanks, Larry, for Googling PRN for the rest of us

ASPPA has this article on its home page right now: https://www.asppa.org/news/correcting-plan-loan-failures-qa-sporadic-loan-repayments

This only applies if the employee continues to be an employee, as opposed to an independent contractor. If they are no longer an employee then it is like any other termination of employment; generally (but not always, read your loan program) the outstanding balance of the loan becomes due immediately and if not repaid, would be offset.

If the participant is a qualified individual under the CARES Act then they could presumably postpone their loan payments.