austin3515 Posted June 25, 2010 Posted June 25, 2010 Loan balance of $20,000. Original date of loan is 2 years ago. Loan is repaid on Monday, so the loan balance is zero. A new loan is taken 1 week later for $20,000 and a new 5 year term is granted, Discuss Austin Powers, CPA, QPA, ERPA
Guest Sieve Posted June 25, 2010 Posted June 25, 2010 As long as the payback of loan #1 does not result from a refinancing plan loan--i.e., the repayment is from other assets, perhaps even a bank loan--then I think that's OK, and the new $20,000 loan can be amortized over 5 years.
masteff Posted June 28, 2010 Posted June 28, 2010 As long as the payback of loan #1 does not result from a refinancing plan loan--i.e., the repayment is from other assets, perhaps even a bank loan--then I think that's OK, and the new $20,000 loan can be amortized over 5 years. Strike the words "I think".... as long as the 1st loan is paid off w/ funds from outside the plan, no matter how temporary, then it is NOT a refinancing. Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra
austin3515 Posted June 28, 2010 Author Posted June 28, 2010 I wouldn't have thougth so either, but one of the best ERISA attorneys I know, says their concerned that it could be viewed that way, since the outcome is people obtaining bridge loans for the sole purpose of circumventing the 5 year requirements. They were of the opinion that provided "X" amount of time elapses it should be OK, wherein X is a sliding scale, the larger the value, the less likely it is that there could be the appearance of a refinancing. But I am inclined to agree with you both, that it wouldn't be a refinancing... Austin Powers, CPA, QPA, ERPA
Guest Sieve Posted June 28, 2010 Posted June 28, 2010 I believe that a legitimate repayment from another source--e.g., bank loan or personal assets--is sufficient to break the plan loan refinancing chain. Now, if a new $20,000 plan loan was taken, and a few weeks later the old loan's $20,000 outstanding balace was paid off with "personal" assets, then there's a problem--much more so than if it's assets from a 3rd-party loan used to repay the plan loan.
austin3515 Posted June 28, 2010 Author Posted June 28, 2010 How about if the employer makes the loan, as is the case here... I didn;t think that would be relevant, but now that you put it that way... It's coming up in a VCP submission as part of the correction, which is why the employer is even willing to do it. I'll spare the gory details... Austin Powers, CPA, QPA, ERPA
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now