Aftertax - Loans

[Guest Michelle]

When calculating the maximum loan for a participant, can we include the balance in the after tax source?

[LCARUSI]

Yes - theoretically.

If you are determining 50% of the participant's vested account balance, the after-tax portion can and should be included in that determination - unless the plan document has more restrictive language.

For example, I have a document which specifies the max loan is 50% of the participant's deferral account balance (max $50,000). Thus, this document is more restrictive than sec 72 (p) would require.

[MWeddell]

I agree with L Carusi that the answer is yes, but only if permitted by the plan document, including any loan procedures that are considered as part of the plan document.

Some plan documents also will differentiate between what types of contributions the loan money can come from and what types of contributions can be used when making the 50% of the vested account balance calculation.