Participant’s missed plan loan installment payments did not violate level amortization requirement because they were properly cured

A participant’s missed installment payments for a Code Sec. 401(k) plan loan did not violate the level amortization requirement under Code Sec. 72(p)(2)(C) because these payments were cured within the applicable cure period by payment of the amount due or by the refinancing of the loan, according to an IRS Chief Counsel advice memorandum.
The IRS assumed that the 401(k) plan permitted plan loans and allowed for a cure period, as described in IRS Reg. §1.72(p)-1, Q&A-10(a), in which a participant could make up a missed installment payment by the last day of the calendar quarter following the calendar quarter in which the required installment was due. The IRS explained that, in two situations, the participant properly cured missed loan repayments by either making payments within the cure periods or by refinancing the loan with a replacement loan within the cure period. Accordingly, there was no deemed distribution of the loan amounts due to the missed installment payments.

Source: IRS Letter Ruling (Chief Counsel Advice Memorandum) 201736022.
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