Loan from Seg. Acct.?

[David]

I have a husband and wife that closed their corp. and terminated the DB plan and rolled their lump sum distributions to a segregated acct. in their new sole proprietorship DC plan. My limited understanding of loans is that loans are not allowed from a qualified plan of a sole proprietorship. If that's true, in this case does it apply to the segregated acct. as well?

[R. Butler]

EGTRRA has eliminated the restriction on plan loans to sole propreiters for plan years beginning after 12/31/01. I have also read commentaries and other posts on this message which suggest that the IRS will waive prohibited transaction penalties on loans made to self-employed's prior to 1/1/02 if the loan would have been allowed under the new law.