A participant with a loan balance wants an inservice dist.

[Lori H]

Current loan balance appx $25K

Current account balance appx $25K

Current total account balance appx $50K

This participant can not have a in service dist since he needs his account balance to secure the loan, correct?

[Lou S.]

Not true. The security issue at the time the loan is issued.

[ESOP Guy]

Agree with Lou S.

[GMK]

Further discussion here:

http://benefitslink.com/boards/index.php?/topic/55686-loans-and-withdrawals

see post #5

[Lori H]

Thank you kindly for the responses and link.

[K2retire]

Don't be surprised if the plan's recordkeeper doesn't get this right. Many of them will try to prevent an in-service withdrawal in this situation.

[SearchLight]

I'd add that if they do allow the in-service as they should, they also need to make sure that the loan isn't offset automatically as part of the distribution process. Some recordkeeping systems (cough cough) are coded such that offset is the default action when a distribution occurs, even if that's not what should happen.

[nicole_m]

In regard to the last comment about RK systems, just wanted to note that some systems do automatically offset when a distribution occurs, but only if the withdrawal was triggered by was due to a termination of employment triggering event (though I'm sure there are other systems that do indiscriminately offset with any type of distribution, due to unsophisticated programming.)