Participant takes unpaid leave on January 2, 2008 which is the date of his last loan repayment. Does loan default on 1/2/09 or is it possible to inerpret 72(p) to allow a cure period to allow payment to begin prior to 6/30/09? Participant will be going back on payroll next week.

72-(p) Q&A 10 does not specifically state this but IRS Q&A with the ABA in 2003 stated that the cure period would allow a loan to extend beyond 5 years if the last payment of the loan was missed.

Loan policy would not prohibit this interpretation.

Thanks

I agree with IRS Q&A with the ABA in 2003 as you explain it. If 1/2/09, the due date of the last repayment, was no more than 5 years from when the loan was made, you should be fine even if the plan loan program and loan documents do not call for default to occur until a payment is late within the regulatory allowance (last day of calendar quarter first following the one in which the payment was due), i.e. 6/30/09 on your facts. But check the applicable documents to make sure they do not call for default to occur earlier than that.