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Dealing with Participant Loan Defaults [2017]
Presentor: David Schultz Recorded Date: 3/30/2017 Duration: 60 Min.

Description
This program was recorded during a live presentation given on March 30, 2017 at 12:00PM EST.
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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 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
Prerequisites:

There are no prerequisites or advance preparation for this program. However, the instructor will assume attendees are familiar with the basics of handling plan loans. At least 1 year of experience is recommended

Level: Intermediate.

Instructional Delivery Method
Group – Internet-Based

NASBA Field of Study: Taxes

Speaker: David Schultz, J.D.

Objectives: 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

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