Frequently Asked Question
If there are two plans and one is terminated, creating a distributable event, can loans in the terminated plan be rolled over?
It depends.
If the loan is in good standing - the participant did not default on the loan and the loan meets other statutory requirements - then the loan is treated as an offset and is rollover eligible.
If the loan is in default, then the amount is not rollover eligible. Reasons for a loan being in default include the participant not making loan repayments on at least a quarterly basis.
A loan offset is reported as a regular distribution with Code 1 or Code 7 - depending on the participant's age - inBox 7
A deemed distribution is reported with Code L in Box 7
For related reading, see Qualified Plan Loans: Guidelines To Operations and Borrowing From Your Plan.
This question was answered by Denise Appleby
(Contact Denise)
If the loan is in good standing - the participant did not default on the loan and the loan meets other statutory requirements - then the loan is treated as an offset and is rollover eligible.
If the loan is in default, then the amount is not rollover eligible. Reasons for a loan being in default include the participant not making loan repayments on at least a quarterly basis.
A loan offset is reported as a regular distribution with Code 1 or Code 7 - depending on the participant's age - in
A deemed distribution is reported with Code L in B
For related reading, see Qualified Plan Loans: Guidelines To Operations and Borrowing From Your Plan.
This question was answered by Denise Appleby
(Contact Denise)
by
Denise Appleby
Denise Appleby is founder and owner of Appleby Retirement Consulting,which provides technical consultation, content, coaching, writing, editing and training services on related topics.
With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
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