In Service Distributions and Loans

[Guest smac]

Participant has taken 50% of vested balance as loan. Several months later, the participant would like to take out the remainder of his monies as an in-service distribution. In-service distributions are allowed by the plan for any reason. Loan payments are still being made on the loan. Can the plan disburse the remaining funds as an in-service distribution or do the funds need to remain in the participant's plan account to support the oustanding loan balance? Thanks for your help!

[Leopurrd]

the 50% "collateral" is only on the day of the loan, according to 72(p). In service is fine afterwards as long as the doc permits.

Watch out for language in your loan policy asking for loans to be paid in full upon a distributable event (aka in service)

Vicki