In-service withdrawal with a loan

[Guest VPA]

We have a participant who is age 65, NRA in the plan document. He would like to take a loan for 50% of his vested balance and then, later, take an in-service withdrawal of the remainder of the account. The plan document allows for pre-retirement distributions after age 59 1/2 of up to 100% of a participant's vested balance. Are there any restrictions on his ability to do this since he is essentially withdrawing the collateral for the original loan?

[MWeddell]

There are no restrictions on doing this. Whether there is adequate security is measured at the time the loan is taken, not afterward. Furthermore, the security is the half of the account from which the participant borrowed (which is now invested in a promissory note), not the remaining half of the account.