"Is there a requirement to provide notice to participants if a plan is not going to make a discretionary match one year?"

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"A plan participant terminated employment in June 2024 with an outstanding loan. The plan permits immediate distributions upon termination.

• The participant received a distribution in June 2024.
• The loan was not offset against with the distribution and subsequently defaulted between September 30th and October 1st, 2024. This appears to comply with the '2-quarter rule' for loan repayment requirements & default.
• As the participant was not rehired, the loan accrued interest from the distribution date until the default date.

Issue: The participant's 2024 1099-R includes interest accrued on the defaulted loan, even though the loan was not offset against the distribution in June. Questions:

1. 1099-R Accuracy: Should the participant request a correction to their 2024 1099-R before filing their taxes? Is the 1099-R likely to overstate the taxable distribution due to the inclusion of interest accrued between the distribution date and default date?
2. Plan Policy and Procedures:
   • Are there any specific laws or regulations that address this situation?
   • Does the plan document or loan procedures outline the treatment of outstanding loans upon termination and distribution?
   • Is it reasonable to expect the plan sponsor to actively seek information about the participant's loan repayment intentions at the time of distribution to avoid potential interest accrual?
   • Given the plan's offset provision, why wasn't the loan offset at the time of the distribution?"

"Our ESOP lays out the statutory requirements for distributions. Our Distribution Policy has the details. Can we literally just change anything in the Distribution Policy as long as we stay within the statutory requirements? For example, the ESOP says we can require participant to wait until the plan year that is five years after the year of employment termination. The Distribution Policy says we will distribute small accounts (say, $10,000 or less) in the year following separation. Can we change the Distribution Policy to say all accounts (no matter what size) have to wait five years? This still complies with the statutory requirements and is consistent with the ESOP language, but is it a problem that we are treating similar employees differently (i.e. small account balance participants have very different treatment before and after the Distribution Policy change)?"