Max Loan Limit

[Guest Celtics]

A participant in a 401(k) plan has $6,000 in his deferral account and $50,000 in his profit sharing account for a total of $56,000. He is fully vested. The plan allows loans but only from the deferral source. Is the 50% limit based on his entire account balance or just the deferral account balance? If on his total balance, the maximum loan amount would be $28,000 but then limited to the $6,000 in his deferral account. If on his deferral account only, he could only borrow $3,000. Thanks.

[rcline46]

If the document is properly drafted, it will say what sources are to be used to determine the 50%. It also may be in the administrative policy. If not found, the client must make the call.

[BG5150]

And, if a distinction is missing, you may want to add it via amendment or updating the loan policy.

[Guest Celtics]

The Loan Policy states that the loan cannot exceed 50% of the non-forfeitable account balance. It then states that loans can only be made from employee deferrals. Still unsure.

[Belgarath]

In your situation, I would read this to allow a 6,000 loan.

[ETA Consulting LLC]

I'm with Belgarath on this one. Your loan availability is $28,000. However, since they are distributed ony from Deferrals, then you're limited to 100% of the deferral source. The loan is still under the $28,000 (legal) limit.

Good Luck!

[Guest Celtics]

Thanks to all who took the time to reply!