Primary Residential Loans

[Safeharbor29]

Hello, what is the consequence if a plan did not obtain the supporting documentation to prove the loan from the 401k or 403b plan was for the purchase of a primary residence? Is self-correction available? Are there penalties/or filings assessed?

[QDROphile]

Is the question about lack of documentation or actual ineligible use of loan proceeds?

[Lou S.]

If it is lack of documentation, the correction is simply to get the documentation and retain it. I guess you could call that self correction.

If it is that the proceeds were not used for primary residence, the correction is available through VCP. Either through re-amortization over no more than 5 years from the original loan or through loan default for violation of 72(p) if outside the 5 year window from the original loan.

[Cookflhx]

What is VCP?

 

[K2retire]

The IRS Voluntary Correction Program.