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Calculating 50% of account value for max loan


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With this date of constant market fluctuation, what is considered 50% of the balance to take a loan?  Is it the date the loan was requested, approved, or processed?  Below is what is says in code section 72(p).  I have a participant who requested a max loan on 3/9 and we are processing it today.  Of course, the balance is way less today, so his loan availability is much less today.  Would it be appropriate to process it today for the balance requested on 3/9 because it was 50% on the date he requested it?

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4 hours ago, pensiongeek said:

With this date of constant market fluctuation, what is considered 50% of the balance to take a loan?  Is it the date the loan was requested, approved, or processed?  Below is what is says in code section 72(p).  I have a participant who requested a max loan on 3/9 and we are processing it today.  Of course, the balance is way less today, so his loan availability is much less today.  Would it be appropriate to process it today for the balance requested on 3/9 because it was 50% on the date he requested it?

 

No. It's the balance when you make the actual loan.  And that balance is tied to the definition of valuation date.  So it may be that, if it is not a daily val plan, an interim valuation may be appropriate.  Just another reason why we have very few plans that allow loans!

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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Larry is right, it's the balance as of the date when the loan is made.  I would say the loan is made once the loan note has been executed.

Regarding the 100% availability for loans, currently, that specific to "qualified individuals"(i.e. those diagnosed with COVID, spouse or dependent, those who suffered financial loss to loss of wage due to COVID-19, etc...).

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