Guest rocnrols2 Posted April 10, 2003 Posted April 10, 2003 If a participant requests a 5-year loan, when does the 5-year clock start to run, (a) from the date the participant signs the promissory note; (b) the date the participant gets the check; or © the date the employer begins deducting repayments from the employee's payroll?
Mike Preston Posted April 11, 2003 Posted April 11, 2003 I'd say it is from the date that the loan officially begins, and that is the date that interest is first charged to the participant. But that is without looking it up. Maybe there is a cite somewhere that defines it better.
Guest rocnrols2 Posted April 13, 2003 Posted April 13, 2003 Actually, with a little more digging, I found the answer. According to the TEFRA Blue Book, the five-year term begins with the first loan installment due date. Thanks for your reply.
Mike Preston Posted April 13, 2003 Posted April 13, 2003 I found this in the TEFRA Blue Book: "A loan made with respect to an employee under a qualified plan, etc., which is not required to be repaid within 5 years, is treated as a distribution. For this purpose, the period within which a loan is required to be repaid is determined at the time the loan is made." Is that the section you were thinking of? Or is there a different section? I also found a reference to ASPA 1998 Q&A 14, which purportedly states that: "The five-year period begins on the effective date of the loan."
Guest rocnrols2 Posted April 15, 2003 Posted April 15, 2003 Mike, The BNA Tax Management Portfolio on Taxation of Plan Distributions paraphrased this and cited to the TEFRA Blue Book. Therefore, I do not have the actual language from the Blue Book.
Mike Preston Posted April 15, 2003 Posted April 15, 2003 Well, how about a snippet from there? The reason I ask is that I think you may be misinterpreting what was written, based on my citation which I posted.
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