Loan for non participant from their rollover?

[CJS07]

Can an employee who is not yet a participant take a loan from their rollover account? The document allows non-participants to roll their money into the plan. I am thinking that the employee cannot take a loan until they become a participant but wanted to see if anyone else had any thoughts on this. thanks

[PLAN MAN]

What does the plan document and/or the loan administration policy say about this? If it is discussed in one of these documents, you should have your answer. I think ERISA permits an employee who is not a full participant in the plan to take a loan under the party in interest definition. See section 3(14)

[WDIK]

Although the employee in question has not yet satisfied the eligibility requirements for employer contributions/salary deferrals, doesn't the mere fact that the individual has an account balance and is entitled to plan disclosures (such as the SAR) define such person as a participant?

[masteff]

I don't remember if it was our plan text or just the SPD's that referred to this type of person as a "restricted participant".

Our loan rules merely required an account balance and active employment, so a restricted participant such as this was allowed to take a loan from a rollover. In fact, a few new hires will do rollovers solely for the purpose of being able to take a loan even though they're not yet eligible to make contributions. It goes back to the comment above about what do your plan and loan rules say.