Has anyone seen a plan allow a loan over the $50,000 limit on purpose. I understand it is a deemed distribution. They do not want to amend plan to allow for in-service distributions but someone needs money to buy company stock and the loan over the $50,000 is the only way he can get enough money since most of his assets are in his 401(k) Plan.

I am interested in your thoughts on this.

Not a problem ....... except for the fact that it could disqualify the plan. I mean, if you're going to break the law, why not just make an illegal in-service distribution to the participant. Same thing.

PIP is correct that there may be severe plan ramifications. A loan in excess of the limits is a prohibited transaction that requires excise taxes to be paid and the correction of the transaction. You may also get into some anti-assignment issues if I recall.

How about a hardship distribution?