Rolling Over Loans

[Guest andmik]

I have a plan sponsor that wants to allow an employee to rollover an outstanding loan from his prior employer plan. The prior employer is not related to this plan sponsor.

The Plan Document contemplates rollover loans only from predecessor plans due to an acquisition.

The Plan Document appears to be silent on whether it will accept loan balances from non-affiliated plans.

As I understand the general logic, both the sending and receiving plan must allow for this in the documents. Would the document's silence on this point be interpreted as not allowing unless it is affirmatively drafted in the doc or would the silence provide the room needed to stretch the interpretation to allow the loan rollover?

Thanks in advance for your insight.

andmik

[mbozek]

Why not amend the plan to permit loans by new hires?

[Alf]

I don't believe the receiving plan has to specifically permit loans to be rolled over. If you treat the loan as an accounts receivable asset (which it is), you should be able to accept it as any other asset unless the plan says that all rollovers must be in cash (not in property) or that no loan rollovers are permitted. Also, the receiving plan must, of course permit loans generally I imagine.

[mbozek]

Alf: since a qual. plan must be administered in acordance with its terms in order to retain its qualified status and loans are not required to be offerred, the plan cannot permit a rollover of a loan from another plan unless which is not the result of an acquisition unless it obtains an opinion of counsel that the plan can be interpreted in that way which will cost more than an amendment to the plan.

[Kirk Maldonado]

My guess is that the counsel will issue an opinon that you should amend the plan.