Loan distribution from Money Purchase source of money

[Guest EPS2]

A PS sharing plan that was merged with a past MP plan several years ago.

Participant loans are allowed.

Is it not true that we can use the MP account balance to calculate maximum loan amount, but when it's time to make the loan distribution, we must only take it from the PS source.

Is this true?

[Guest Sieve]

Depends, of course, on the terms of the plan itself. Otherwise, there is nothing to prevent a MPPP from either allowing a participant loan or issuing a loan from old MPPP $$. But, if the trustee never intended to collect on the loan, or if the participant never intended to repay, then the "loan" might be considered an in-service distribution, disqualifying the plan (or requiring correction under VCP).

[Laura Harrington]

Depends, of course, on the terms of the plan itself. Otherwise, there is nothing to prevent a MPPP from either allowing a participant loan or issuing a loan from old MPPP $$. But, if the trustee never intended to collect on the loan, or if the participant never intended to repay, then the "loan" might be considered an in-service distribution, disqualifying the plan (or requiring correction under VCP).

I agree with Sieve; no reason you cannot take a loan from the money purchase assets unless the document says you cannot.

Don't forget that if loans are allowd from the MPP source, spousal consent may be required.

[JanetM]

Loan from MPPP MUST have spousal approval. MPPP is subject to minimum funding under 412 and therefore subject to all QPSA & QJSA rules.

[Blinky the 3-eyed Fish]

I remember in English class to be very careful using words like must and always, etc.

The balance could be under $5k, which would not require spousal consent.