Archimage Posted July 9, 2003 Posted July 9, 2003 A plan allows participants to refinance (replace) loans in order to take out a greater amount that is needed. I know that the sum of the replaced loan and the new loan cannot be greater than 50% of the vested balance as of the origination date of the new loan. My question is should the vested balance used to calculate the 50% include the value of the old loan?
g8r Posted July 10, 2003 Posted July 10, 2003 Yes, I think it should include that amount. The note being held by the plan is an asset of the account. Where you need to be careful is under the 72(p) regs regarding the repayment period. If the original loan is extended beyond the intial 5 year period, then both loans (the old one and the refinanced one) are treated as outstanding at the same time in applying the loan limits.
Archimage Posted July 10, 2003 Author Posted July 10, 2003 The old loan is being replaced by the new loan. As long as the value of the old loan plus the value of the new replacement loan does not exceed 50% of the vested account balance, you are allowed to go beyond the original repayment period.
ccassetty Posted July 10, 2003 Posted July 10, 2003 The combined total cannot exceed the reduced $50,000 limit either. Carolyn
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