RayJJohnsonJr Posted August 4, 2015 Posted August 4, 2015 An active partner in a professional firm, who is age 66, has a loan outstanding of $30,000 and an account balance of about $100,000 in addition to the loan. NRA is age 65. How much can he withdraw as an in service withdrawal? Thank you
My 2 cents Posted August 4, 2015 Posted August 4, 2015 As a suggested starting point for this inquiry, what does the plan say? ETA Consulting LLC and ESOP Guy 2 Always check with your actuary first!
RayJJohnsonJr Posted August 4, 2015 Author Posted August 4, 2015 The Plan allows the withdrawal of any amount the participant chooses. What I was concerned about is the loan. Since at the time the loan is made, it cannot exceed 50% of the vested account balance, would it be true that the plan needs to retain $30,000 to equal his loan balance since the loan cannot exceed 50% of the vested account balance? That seems logical, but I cannot find any authority which addresses this question exactly. Thanks for your help.
Lou S. Posted August 4, 2015 Posted August 4, 2015 The loan limit is at the time the loan is issued. His account balance after that is irrelevant for existing loans. It only effects his ability to take new loans, if allowed. hr for me 1
RayJJohnsonJr Posted August 4, 2015 Author Posted August 4, 2015 Thank you, Lou, for clearing that up for me.
ESOP Guy Posted August 4, 2015 Posted August 4, 2015 I would add that based on what we are told here I would think the person could take 100% of his account balance is they so wished. They could take about $100,000 in cash and $30,000 as the loan in kind. So the taxable amount would be about $130,000 and the cash they received is $100,000. Unless there is something in the plan document that says they can't take the loan in kind I don't see any reason why they can't take their whole balance. It just wouldn't all be in cash.
RayJJohnsonJr Posted August 5, 2015 Author Posted August 5, 2015 Thanks ESOP Guy. I'll mention that to him.
BG5150 Posted August 5, 2015 Posted August 5, 2015 If he's still working it would be silly to take the loan balance, unless he is having trouble making the payments. hr for me 1 QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
ESOP Guy Posted August 5, 2015 Posted August 5, 2015 If he's still working it would be silly to take the loan balance, unless he is having trouble making the payments. I agree. I just added my comment because the original question was about the maximum amount he could take.
david rigby Posted August 5, 2015 Posted August 5, 2015 If he's still working it would be silly to take the loan balance, unless he is having trouble making the payments. It's possible this is why he wants an in-service distribution. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
RayJJohnsonJr Posted August 5, 2015 Author Posted August 5, 2015 The participant only needs to withdraw the $100,000 and not the loan, the loan repayment is not presenting a problem. The participant simply has an unanticipated need for the money.
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