Calculating minimum distribution with loan in the account balance

[Guest terric]

When calculating a minimum distribution for a participant that has an outstanding loan balance under the plan, do you use the entire account balance including the outstanding loan balance?

Thanks.

[JanetM]

Yes you include the loan balance as it is an asset.

[Guest terric]

That is what I thought - just had the question asked and wanted to double check.

Thank you!

[Guest Tammy2006]

So, for mandatory 20% withholding, do I have to take into accoutn the whole balnce, including the loan?

For example: total assets: 10,000 (includes outstanding loan of 4000) do I have to withhold 2000 for federal or 1200 (20% of 6000)?

Thanks very much.

[JanetM]

Not sure I understand your quesiton. Entire balance is 10K and 4K of that is loan. Are you distributing entire balance, including the loan as minimum distribution? If gross pay out is 10K on 1099 - than yes the tax is 2,000.

[Guest Tammy2006]

JanetM,

Hope this will explain my question:

the balance is 10k with 4k loan (6k assets at custodian) . The participant is terminted and requested a lump sum. The loan will be offset. I also have to tell the custodian how much to send to participant and how much is for taxes:

Option 1:

10k balance of which 4k is outstanding loan

gross distribution is 10k: participant receives $4800 and $1200 for taxes (20% of 6k). and 4k is deemed distribution

Option 2:

10k balance of which 4k loutstanding loan

gross distribution is 10 k: participant receives $4000 and $2000 for taxes (20% of 10k) and 4k deemed distribution

My question is, do I have to take into account the entire balance when calculating the taxes to be withheld due (10k) or just the 6k? Am I responsible for withholding 20% for the loan? Thanks

[JanetM]

Withhold $2,000, that is 20% of gross distribution.