A:

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 - in

Box 7

of Form 1099-R.

A deemed distribution is reported with Code L in B

ox 7

of Form 1099-R.

For related reading, see Qualified Plan Loans: Guidelines To Operations and Borrowing From Your Plan.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  2. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  3. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
Related Articles
  1. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  2. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  3. Personal Finance

    College Loans: Private vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  4. Personal Finance

    Parents: Beware of Taking Out a Direct PLUS Loan

    Direct PLUS loans are heavily advertised to parents who want to help support the financial costs of their child's education, but are they a good idea?
  5. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  6. Retirement

    Sometimes It Pays to Borrow from Your 401(k)

    401(k) loans have been demonized, but they're often the most beneficial source of cash.
  7. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  8. Personal Finance

    An Introduction to Federal Direct Loans

    Federal Direct Loans provide student funding that a majority of people can easily access. Find out if you qualify.
  9. Personal Finance

    Understanding Loans

    A loan is the act of giving money, property or other material goods to another party with the expectation of being repaid.
  10. Personal Finance

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
RELATED TERMS
  1. Loan

    The act of giving money, property or other material goods to ...
  2. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  3. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
  4. Loan Register

    A journal that chronicles the recording of time loans. The loan ...
  5. Credit Crisis

    A crisis that occurs when several financial institutions issue ...
  6. Commercial Loan

    A debt-based funding arrangement that a business can set up with ...
Hot Definitions
  1. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  2. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  3. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  4. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
  5. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  6. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
Trading Center