Disregarding Rollovers

[Guest EBBeginner]

I know that EGTRRA allows a plan to distribute a participant's account without his or her consent, and without the spouse's consent, when the amount in the account is less than $5,000. And when calculating the account balance, EGTRRA allows rollovers to be disregarded.

My question is this: I have a plan that requires a participant to get his/her spouse's consent when obtaining a loan. Additionally, the document indicates that if the amount of the loan is $5,000 or less spousal consent is not required.

However, the document does not indicate that in a loan situation the $5,000 threshold can be calculated without regard to rollovers. I am concerned about applying this disregarding of rollovers in the loan situation. The heading on the IRS EGTRRA model amendment only refers to disregarding rollovers when applying the cashout rules. I cannot find any guidance or anything in the preambles to EGTRRA that would indicate in a loan situation rollovers can be disregarded in calculating the $5,000 amount. Any thoughts on this?

[Appleby]

IMHO, Spousal Consent is required…

From Revenue Ruling 2004-12 ”a distribution of amounts attributable to a rollover contribution is subject to the survivor annuity requirements of §§ 401(a)(11) and 417...as applicable to the receiving plan."....it would seem then the loans are subject to the same requirements...

[Appleby]

Rev. Rul. 2004-12 attached

Rev._Rul._2004_12.pdf