Convert Loan Balance into In-service Withdrawal?

[jaxon1225]

Our 403(b) plan allows for loans (any time) and in-service withdrawals at age 59 1/2. A participant that is age 62 was told by our retirement admin company that they could stop paying on their loan and have the outstanding balance (essentially) converted into an in-service withdrawal. The payments were stopped and then the retirement admin company changed their stance and said that she could not stop the repayments.

I know attainment of age 59 1/2 is a distributable event, but is this an allowable reason to just stop loan repayments and deem the outstanding balance as an in-service withdrawal as they originally stated? Thank you.

[Lou S.]

Request an in-service distribution of the loan balance. Problem solved.

[QDROphile]

Be careful about what the plan says about distributions. The plan might be silent about the specific circumstances, such as the ability to elect to have the loan distributed, but what would you do if the plan says that an elective distribution must be in cash or that distributions will be charged pro-rata to the investment funds?

What is the plan adminstrator going to do to the admin company?