This advisory answer provided by preferred investment provider, Transamerica
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When Does A Loan Default Occur, and How Do I Handle It ?
(Regarding Loans From Retirement Plans)
A loan default occurs if a participant's loan repayment is not made by the due date of any payment. If the
missed loan repayment is not received by the last day of the calendar quarter following the calendar quarter
in which the loan repayment was due (referred to as "cure period"), the loan is deemed distributed.
(i.e. a loan is due by Feb.1, and payment is not rec'd by Feb. 1 the loan is in default. If the missed
payment is not then made by June 30, the loan will be deemed distributed)
Loan whose "cure period" has not expired.
Inform participant that full repayment of current outstanding delinquent payments are due by such in such
date (whichever day quarter ends on 3/31, 6/30, 9/30, or 12/31) Collect the payments either through payroll
deductions or personal check from the participant and include these amounts in the next contribution due before
the end of the calendar quarter following the calendar quarter in which repayments were missed.
Loan whose "cure period" has expired.
Loan amount is deemed distributed, please contact the designated plan representative to proceed with the
proper paperwork and documentation.
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Question:
An Employer with a Defined Benefit Pension Plan would like to know if the Plan can reimburse the Employer
for plan expenses such as annual administration fees and amendments he/she recently paid?
Aswer:
If the plan document allows, the plan may reimburse the employer for current year plan expenses paid
by the employer (prior year expenses cannot be reimbursed).
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Question:
Who is eligible to receive the $500 credit for adopting a qualified retirement plan?
Answer:
EGTRRA allowed tax credits to small employers. The 2006 PPA made this permanent. A small employer
for this purpose is an employer with no more than 100 employees who received at least $5,000 of
compensation in the preceding year and that have at least one non-highly
compensated employee participating in the plan.
An employer cannot use the startup credit if it has maintained a qualified employer plan
at any time within the previous three years. The term "Qualified Employer Plan" means
a plan qualifying under section 401(a), an annuity plan described in section 403(a), a
simplified employee pension (within the meaning of section 408(k)), or a simple
retirement account (within the meaning of section 408(p)).
The credit is equal to 50% of the first $1,000 of administrative and retirement-education
expenses they incur for each of the first three years after the adoption of a new plan.
EGTRRA also allows small employers to submit an application for a determination letter
to the IRS for newly established qualified retirement plan without paying the user fee
normally applicable to such submissions.
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Question:
1099 reports net distributions - if distributions come out of participants' accounts, should the 1099-R
reflect the amount including the fee or less the fee?
Answer:
The 1099-R is for the net amount. The distribution fee is a plan expense allocated to the plan participant.
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