What options are available to cure the loan that is outside the cure period?

The options depend upon whether you or the employee caused the failure to timely pay the loan.

  1. If the employee failed to pay, then the loan balance should be reported to the IRS as a taxable distribution as of the last day of the cure period.
  2. If the employer’s actions caused the repayment failure (for example, a payroll withholding error), then the IRS permits a correction using its self-correction program (SCP). The correction procedure involves bringing the loan current by either a single-sum repayment, re-amortization of the outstanding loan balance, or a combination of the two.

Note: SCP has additional rules. Not every failed repayment situation qualifies. Please contact the Alerus administrator assigned to your plan for further information.