Aggregation of Plans when determining maximum amount of loan

[Guest sammy]

The proposed regulations under Section 457 provide that participant loans are permitted under an eligible governmental plan to the extent permitted under 72(p)(2) and Treas Reg 1.72(p)-1.

As I read 1.72(p)-1, if a governmental employer offeres both a 403(B) plan and an eligible 457 plan, loans from the 403(B) plan would need to be taken into account in determining the maximum loan permitted under the 457 plan, and visa versa. Am I reading this correctly?

As loans from 403(B) plans are frequently initiated through the annuity vendor, rather than the employer, and that vendor may not be the investment provider for the 457 plan, this seems like an impractical, basically unworkable rule.

Any thoughts would be appreciated.

[Guest dietpepsi]

If the client has a 403(B) it is unlikely that they also have a governmental 457 plan. They might have a tax exempt 457 plan, but that plan should not allow for loans. Only governmental plans should allow for loans. What structure is this client? Is it a public school? Just curious.

[Guest sammy]

Actually, it is a public school, and it has had both a 403(B) plan and an eligible Section 457 plan for many years. Due to the coordination rules, the 457 plan has been inactive. However, due to the EGTRRA changes employees are now interested in contributing to both plans.