Max loan from two plans, now plans are merging!

[AlbanyConsultant]

Hi.  I'm working on two related companies (that do not rise to the controlled group or affiliated service group level) where the top guy (who is in both companies/plans) took a max $50K loan from each plan - each loan was a valid loan based on amount, etc.

 

Now there may be a change in ownership that will put these entities into the same controlled group.  There is even talk about merging the plans.  His loan balance will be more than $50,000, but is that OK since the loan(s) were valid when they were taken?

 

Thanks.

[Lou S.]

I'm 99% certain that the rules apply to the time the loan is issued so I think you would be OK even though the loans would now exceed 50K in the post merger plan.

It seems similar to a participant with a 100K vested balance taking a 50K loan and then shortly after taking a distribution or the account incurring a large loss where the loan now exceeds 50% of the vested balance which is perfectly fine.

 

[Belgarath]

You may, however, possibly have trouble with vendor/recordkeeping platform - I don't know - haven't happened to run into this situation before. Some of them aren't too user-friendly with stuff that doesn't fit into a normal pigeonhole.

[formeractuary]

I don't have a cite (or if one germane to this topic exists), but I know we have merged plans where participants had 2 loans in each (the max in each plan) and were permitted to have 4 loans in the merged plan until they were all paid off.