401k Loan Rollover

[2muchstress]

A participant had a 401k loan with a previous employer and wants to roll it over into the new employer's plan. Does the participant need to rollover enough cash to collateralize the loan?

Example: Account balance is $30,000 ($15,000 in cash and $15,000 loan) Can the participant rollover the $15,000 loan balance to the new plan and then only rollover $5,000 in cash?

Any thoughts, ideas, cites are appreciated.

[RTK]

Assuming the security for the loan is the balance of the account borrowed, I don't think participant must rollover any cash (unless that is a plan requirement for the rollover).

I view it this way. Participant with $30k account borrows $15k and pledges borrowed $15k as security for the loan. After the loan, participant has $30k account, consisting of $15k cash and $15k loan. Participant then defaults and plan forecloses on $15k loan balance. Participant would then have a $15k account, consisting of $15k cash. Thus, in that scenario, the $15 cash is not needed as security for the loan. A rollover should not change that.

[QDROphile]

Consider a policy and plan design that does not allow loan rollover unless the entire account is rolled over form the other plan. That is independent of your question. The loan can properly be rolled over by itself. Of the reasons for rolling over only the loan, most are negative from a policy perspective one way or another.