PART IV. DESCRIPTION OF PROPOSED METHOD OF CORRECTION
Internal Revenue Bulletin 2008-35 · 2026-10-03 edition · updated 2026-10-04 · United States
If the Plan Sponsor is requesting relief from reporting loans as deemed distributions, then complete Parts IV A, B, or C, as applicable.
If the Plan Sponsor is only requesting postponement of reporting loans as deemed distributions on Form 1099–R, then proceed directly to Part IV D.
A. Correction for Loans in Excess of § 72(p)(2)(A)
Any participant affected by this failure will make a corrective repayment to the plan. After repaying the excess of the loan amount over the maximum loan amount under § 72(p)(2)(A) (the “excess loan amount”), the remaining balance of the loan will be paid over the remaining period of the original loan (not beyond the period permitted under § 72(p)(2)(B), determined from the original date of the loan) in a manner that complies with the frequency and level payment requirements of § 72(p)(2)(C). The excess loan amount that will be repaid by the participant is determined based on how previously made payments have been applied to the loan. The previous loan payments were applied as follows (check applicable box, and complete necessary information)
□ Prior loan payments were made in accordance with an amortization schedule that…¶
§ 72(p)(2)(B) relating to the terms of the loan and § 72(p)(2)(C) relating to frequency, and level loan payments. For the purpose of determining the excess loan amount and the remaining outstanding amount of the loan to be repaid over the remaining period of the loan, the previously made loan payments will be applied as follows (check box that applies)
□ 1. Solely to reduce the portion of the loan that did not exceed the maximum loan…¶
Code. Result: The corrective repayment would equal the excess loan amount plus interest thereon.
□ 2. To reduce the excess loan amount to the extent of the interest thereon, with the…¶
to reduce the portion of the loan that did not exceed the maximum loan amount under § 72(p)(2)(A). Result: The corrective repayment would equal the excess loan amount.
□ 3. Pro rata against the excess loan amount and the maximum loan amount under §…¶
repayment would equal the outstanding balance remaining on the excess loan amount on the date that corrective repayment is made.
□ Prior loan payments were not made in accordance with an amortization schedule that…¶
§72(p)(2)(B) or (C):
Methodology for determining the excess loan amount that will be repaid and the remaining outstanding balance of the loan that will be amortized over the remaining period of the loan:
After the corrective repayment is made: (Check one of the two options listed below)
□ Option 1: The remaining loan balance will be repaid according to the original…¶
available only if the original amortization schedule would result in the loan being paid within the maximum period permitted under §72(p)(2)(B) determined from the original date of the loan.)
□ Option 2: The loan will be reformed to amortize the remaining principal balance as of…¶
remaining period of the original loan, provided that the recalculated payments over the remaining period comply with the requirements of § 72(p)(2)(B) determined from the original date of the loan.
2008–35 I.R.B. 550 September 2, 2008
B. Correction for loans with terms that: (i) provided for a repayment period that exceeded the period permitted under
§ 72(p)(2)(B) and/or (ii) provided for payments that did not provide for substantially level amortization with payments not less frequently than quarterly, as provided under § 72(p)(2)(C).
□ 1. The loan balance will be reamortized with payments made on a substantially level…¶
□ 2. The reamortized loan balance will be paid over a remaining period that does not…¶
date of the original loan (per § 72(p)(2)(B)).
C. Correction for defaulted loans with terms that complied with the requirements of § 72(p)(2)(A), (B), and (C): (check
the box that applies)
□ 1. A lump sum repayment will be made to the plan in an amount equal to the additional…¶
participant would have made to the plan if there had been no failure to repay the plan, plus interest accrued on the missed repayments.
□ 2. The outstanding balance of the loan, including accrued interest, will be…¶
not extend beyond five years from the date of the original loan.
□ 3. The Applicant will use a combination of the methods described in 1 and 2 above, as…¶
Determination of Interest Accrued on Missed Repayments: (check the box that applies)
□ Plan loan rate [insert rate] □ Rate of return of investments under plan [insert rate]¶
Note: “Rate of return of investments” option may only be used if the rate of investment return under the plan equals or exceeds the plan loan rate.
Actual Interest Rate used [insert rate]
The interest rate for missed payments was determined as follows:
The additional unpaid interest ( will be / has been (circle one)) paid by the: (check the box that applies)
□ Plan Sponsor □ Affected participants¶
( Note : Irrespective of the Plan Sponsor’s election to have the affected participants pay the unpaid interest, in accordance with section 6.02(6) of Rev. Proc. 2008–50, the Service may, based on the facts and circumstances, determine that the Plan Sponsor should pay all or a portion of the additional unpaid interest. If the Service makes this determination, the Plan Sponsor will be requested to revise this submission.)
September 2, 2008 551 2008–35 I.R.B.
D. Correction for Deemed Distributions (check if applicable)
□ The Plan Sponsor is not eligible to or will not correct in accordance with Parts IV A…¶
Schedule 5. The Plan Sponsor proposes that the loans be reported as deemed distributions (using Form 1099 R) for the year of correction instead of the year of the failure. The Plan Sponsor shall pay any applicable income tax withholding amount that was required to be paid in connection with the failure. (See Income Tax Regulations § 1.72(p)–1, Q&A–15.)
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