Loan Rollover into a plan

[FundeK]

Does a qualified plan have to specifically allow for loan rollovers? Is it acceptable if the plan is written to allow "rollovers from other qualified retirement plans" without a specific reference to loans?

For some reason I have it stuck in my head that the plan had to specifically allow for it, but I can't find a reference for it.

Thanks

[Guest Joel Lee]

The key term is "eligible rollover distribution". If the distribution is eligible for rollover treatment then any plan that is considered a "qualified retirement plan" may decide to accept or reject such distributions.

[WDIK]

One of a number of prior discussions.

[FundeK]

Agreed. The distribution or rollover provisions have to allow the distribution or rollover of the loan, either expressly or within some specified asset class other than cash. Also, the plan terms cannot preclude a rollover of the loan.

This was QDROPhile's statement in the prior post.

So, if your document states "the assets transferred or contributed as Rollover Contributions shall be made in cash or such other form as is acceptable to the Trustee or the Custodian, if applicable" you would accept a loan rollover if directed by the Plan Sponsor because it does not specifically preclude the loan rollover?

[QDROphile]

The highlighted passage applies to the plan that is making the distribution, not the plan that would be receiving the rollover.

The primary issue for the recipient plan is interpretation of plan terms. The loan is an asset, in some ways just like cash. But is the recipient prepared to deal with the asset? For example. will the recipient require payroll deduction to service the loan or will it accept other forms of payment? What about the payment that is now overdue because of the transition? On what basis does it impose those conditions or requirments?