Participant with loan wants to drain their account

[Lori H]

A 61 year old active participant that has a loan balance wants to rollover her balance to her IRA and continue to pay back on her loan. Is this permitted?

[ESOP Guy]

Assuming there is a provision in the document that allows this person to take an in-service withdrawal it is allowed.

The need for the loan to not exceed 50% of the account balance only applies to when the loan is made.

[ETA Consulting LLC]

Back in the Balance Forward (Traditional Recordkeeping days), plans contained provisions stating that no in-service distribution was allowed when a loan was outstanding. This was done in order to maintain proper security in the event the participant does not pay (as the loans were funded from pooled accounts and merely earmarked to the participant). Nowadays, it's as straight forward as ESOP Guy states; but you ALWAYS want to verify it with your document.

Good Luck!

[Lori H]

Inservice is allowed. Thank you kindly

[John Feldt ERPA CPC QPA]

And just to be clear, the loan repayments continue to the plan, they don't make repayments to the IRA.