50% Loan Requirement - Does It Matter After Loan Taken?

[metsfan026]

I;m having a disagreement with someone regarding this:

Once a loan is taken, obviously it can't be more than 50% of the vested balance (up to $50k).  

What happens once the loan is taken?  Does the 50% still stand?  If a participant with a loan then wants to take an in-service distribution (as allowed by the document), can they not take it if it brings the loan balance to be greater than 50% of the balance (i.e. if someone who is eligible opts to take 100% of their balance, leaving the only current asset as the loan balance)?

I've been told by a record keeper that the 50% rule no longer stands once the loan is taken, but I wanted to confirm.  Is there anything in the regs that I can cite, if I'm correct?

Thanks in advance!

[Bri]

Indeed, the loan 50% rule only applies when it's taken.  People have been doing the "Borrow half, hardship the rest" move for years....and that clearly leaves the loan as 100% of the remaining balance.

[metsfan026]

13 minutes ago, Bri said:

Indeed, the loan 50% rule only applies when it's taken.  People have been doing the "Borrow half, hardship the rest" move for years....and that clearly leaves the loan as 100% of the remaining balance.

Thank you!  Is there anything in the regs that I can reference?  I just want to be able to back it up to settle it.  Thanks!