What is the best way to correct this issue? Payroll failed to start loan payments for participant in June 2004. First payment was received 2/13/05 instead. Now 5 year period is about to be up and participant still owes a few hundred dollars more on the loan. Other than asking for participant to pay in full, what are the other options? I saw in ASPPA presentation slides from a recent webinar that if payroll does not start deductions on time there is an EPCRS solution - sited Leonard vs. IRS. I can't find this case by just a google search right now. Anyone know how this can be corrected?

See Revenue Procedure 2008-50 (EPCRS)

Well, the problem isn't that the loan goes beyond 5 years; that isn't even a problem in my book - if the payment are within the cure period.

But the problem is that the loan should have defaulted when the payments were missed and not made within the cure period, probably as of 9/30/04. I don't see a direct fix for this in EPCRS. Maybe I'm just missing something.