Guest sduggan Posted October 21, 2005 Posted October 21, 2005 Has anyone seen a plan allow a loan over the $50,000 limit on purpose. I understand it is a deemed distribution. They do not want to amend plan to allow for in-service distributions but someone needs money to buy company stock and the loan over the $50,000 is the only way he can get enough money since most of his assets are in his 401(k) Plan. I am interested in your thoughts on this.
Guest Pensions in Paradise Posted October 21, 2005 Posted October 21, 2005 Not a problem ....... except for the fact that it could disqualify the plan. I mean, if you're going to break the law, why not just make an illegal in-service distribution to the participant. Same thing.
Blinky the 3-eyed Fish Posted October 24, 2005 Posted October 24, 2005 PIP is correct that there may be severe plan ramifications. A loan in excess of the limits is a prohibited transaction that requires excise taxes to be paid and the correction of the transaction. You may also get into some anti-assignment issues if I recall. How about a hardship distribution? "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
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