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IRA partial rollover to qualified plan


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I believe I know the answer to this, but not sure.

Client maintains a PSP, needs money for mortgage, wife's PSP balance around $50K.

Plan allows for rollovers from IRAs.

Can she rollover to the PSP and then take a loan on 50% of the total account, including the IRA rollover.

I do not believe so - doesn't the IRA still remain an IRA as far as IRA restrictions, ie there is no borrowing?

Not sure.

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Notwithstanding whatever may be allowed by the rules, the entire justification for favorable tax treatment given to IRAs and PSPs is that they are intended to accumulate funds for RETIREMENT. 

A mortgage that cannot be covered from current income is essentially unsupportable (absent extraordinary circumstances), and the best solution is probably to step down to less expensive housing. 

Always check with your actuary first!

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Financial planning implications aside, if a participant rolls from an IRA into a qualified plan they now have a qualified plan rollover account in the plan (not an IRA). Provided the PSP allows for loans from rollover accounts this is permissible.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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  • david rigby changed the title to IRA partial rollover to qualified plan

Mike and CF are correct.  Stated directly, when you roll over money into a QP it is QP money subject only to QP rules.  So, not only can it be borrowed under the plan terms, it also can be distributed after age 55 (not 59 1/2) with no penalty if the participant terminates post age 55.  Just another IRA rule that disappears with the rollover.  And the other important rule that disappears is the Required Minimum Distribution (RMD) for someone post 70 1/2 who is still working and is not a 5% owner at that age.    Larry.

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089

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