Determining Policy Loan Limit

[retbenser]

Partiicipant's account balance (net of all loans) = $50,000

Oustanding balance of Loan #1 = $10,000

Participant wants to make a second loan.

Question: In determining the 50% limit for loan #2, does the account balance include existing loan #1 balance?

That is:

Is the limit of loan #2 =

(a) 50% of $50,000 - $10,000

(b) 50% of $60,000 - $10,000

Thanks for all responses.

[ESOP Guy]

I use the method found in b

[QNPG]

Partiicipant's account balance (net of all loans) = $50,000

Oustanding balance of Loan #1 = $10,000

Participant wants to make a second loan.

Question: In determining the 50% limit for loan #2, does the account balance include existing loan #1 balance?

That is:

Is the limit of loan #2 =

(a) 50% of $50,000 - $10,000

(b) 50% of $60,000 - $10,000

Thanks for all responses.

First limitation:

1. Highest balance in 12 months - $10,000

2. Current balance $9010.72

3. Subtract 2 from 1 $989.28

4. Subtract 3 from $50k = $49,010.72

Second limitation:

5. Enter current vested account balance: $40,000

6. Multiply amoutnon line 5 by 50% $20,000

7. Enter amount from #6 = $20,000

Participant loan limit under the general rule:

8. Enter lesser of line 4 or line 7 = $20,000

9. Enter the participant's outstanding laon balance $9010.72

10 Subtract amoutnon 9 from amoutn on 8 - $10,989.28

Line 10 in this hypothetical situation would be the highest loan amount possible after the first loan is considered.

Hope this format helps.

[Guest Sieve]

I agree with ESOP: add in the loans to the balance of invested funds to get full vested acocunt balance. Not clear to me what QuerkyNerdy believes on this point.

[Lou S.]

The loan is part of the participant's balance so I too agree fully with ESOP Guy.

[BG5150]

I always did:

Lesser of

Test 1:

50,000 - highest outstanding loan balance in past 12 mos*

Test 2:

1/2 vested account balance (including outstanding loan at time of calculation)** - outstanding loan balance

*--in OP, if 10,000 is current outstanding balance and the loan has been in place for some time, the highest balance in the past year is bound to be higher

**--capped at 50,000