S Corp owner loans...

[Guest RONNIE WASEL]

With the passage of EGTRRA, S Corp owners can now take loans from their retirement accounts.

Question - If a plan docuement for a 401k plan already allows loans within a plan, is it neccessary to amend the plan before the S Corp owner can take out a loan?

It would appear to me that this is just an operational issue and that if the plan already allows loans, as long as the loan policy is followed, nothing would need to be amended in order for the owner to take one out.

Thanks,

Ronnie Wasel

Gabbard and Company, P.C.

[actuarysmith]

I would concur with your analysis that nothing needs to be done. However, you may want to carefully read your loan policy statement and make sure that it does not include language that prohibits shareholder-employees from taking loans.

[Belgarath]

You need to look at the plan document. For example, some documents are drafted such that loans by Shareholder-Employees in an S-corp are permissible as long as they do not constitute a prohibited transaction. Since they no longer are, then such a plan would not normally require any amendment. However, some plans are drafted to simply prohibit such loans, and they would require an amendment.