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 >>
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. Managing Wealth

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  3. 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.
  4. 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.
  5. 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.
  6. Personal Finance

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  7. Personal Finance

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  8. Financial Advisor

    Disadvantages of Federal Direct Loans

    Federal Direct Loans are popular ways to get federal help with college costs. However, they do have some drawbacks, especially for graduate students.
RELATED TERMS
  1. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  2. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  3. Loan Register

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

    A crisis that occurs when several financial institutions issue ...
  5. Cash Basis Loan

    A loan where interest is recorded as earned when payment is collected. ...
  6. Loan Officer

    Representatives of banks, credit unions and other financial institutions ...
Hot Definitions
  1. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  2. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  3. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  4. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
  5. Interest Rate Swap

    An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
  6. Custodian

    A financial institution that holds customers' securities for safekeeping so as to minimize the risk of their theft or loss. ...
Trading Center