Q. You have a client that reads IRS guidance as indicating that the relief the IRS provides for those in areas where the federal government has declared a disaster includes being able to postpone payments and grace periods of 403b and 457 loans. Is that correct? Also, your client needs to know if that means that they must catch up the back payments by a certain date or the loan will default or that they can wait until a certain date and then continue payments on the loan and not have to make up the back payments at that time. Finally, your client wants to know if their assumption is correct that the deadline for covered taxpayers is Jan. 31, 2018 for Hurricane Harvey as stated in IRS Announcement 2017-11.
A. It is correct that payments and grace periods of 403(b) and 457 loans may be postponed. The IRS Employee Plans Compliance Resolution System (EPCRS) then permits the participant to rectify the underpayments in a number of ways — resume payments as are determined under the loan note with a balloon payment at the end; recalculate the payment amounts so that at the end of the loan term the loan is paid off; or any combination of these two alternatives.
It is also correct that the date is Jan. 31, 2017 for those in areas the federal government declared to be disaster areas due to Hurricane Harvey.
And remember that the loan limitations do not change — $50,000 max; five-year term.