What it is
Loans and distributions are where plan operations most often go wrong: a loan above the limit, a payment with no distribution event, a missing spousal consent, or a defaulted loan that was never reported as a deemed distribution. This workbook tests a sample of each.
The loans tab computes the maximum allowed from the limits you enter, compares the term to the maximum and recomputes the payroll payment. The benefit payments tab records the distribution event, approvals, spousal consent, vesting, withholding and the tie to Form 1099-R. A summary counts exceptions against a tolerable number.
When to use it
- Testing loans and benefit payments in a defined contribution plan audit.
- Checking loan policy compliance for a plan sponsor.
- Confirming deemed distributions were recorded and reported.
What’s inside
- Parameters: loan limits, maximum term, payroll periods and tolerances
- Forty loans: limit test, term test, payment recomputation and support
- Sixty benefit payments: event, approval, consent, vesting, withholding and 1099-R tie
- Summary of exceptions, coverage and conclusion
Standard cited
This template follows AU-C 703 / IRC 72(p). It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
What are the loan limits?
Under Code section 72(p)(2), a loan, added to the participant’s other outstanding plan loans, is not a deemed distribution if it does not exceed the lesser of $50,000 reduced by the excess of the highest outstanding balance in the prior twelve months over the balance on the loan date, and the greater of $10,000 or half the vested balance. It must be repayable within five years unless it buys a principal residence. The amounts are inputs, and the plan’s own loan policy may be stricter.
What happens when a loan defaults?
It becomes a deemed distribution that is taxable and reported on Form 1099-R. The workbook asks whether the deemed distribution was recorded and reported.
Should I enter Social Security numbers?
No. Use the recordkeeper’s participant ID.
Related templates
- Employee Benefit Plan Participant Data Testing Workpaper
- Employee Benefit Plan Audit Planning Memo (ERISA)
- Form 5500 Schedule H to Financial Statement Reconciliation
Last updated 11/05/2026. All free templates.