Limits on 401k loans?

[Guest peeage]

I'm trying to find out the exact limits for 401k loans. My

company's web site and the web site managed by the plan

administrator indicate in the loan rules that the limit is

the lesser of "50% of your vested account balance, OR

$50,000 minus any outstanding loan balance(s). However,

a representative of the plan's administrator is telling me

that this is incorrect. He said the first limit should

read "50% of your vested account balance minus 50% of your

outstanding loan balance(s)". He said this is a "DOL limit"

. However, everything I've read indicates that the maximum

is $50,000. Any help is greatly appreciated. Thanks.

[KIP KRAUS]

I don’t know where the representative from your administrator got his/her information, but it’s my understanding that the maximum $50,000 available for a loan is less the highest outstanding loan balance in the previous year. I’ve never heard of the 50% rule you mentioned.

[PMC]

Look at IRC Sec. 72(p)(2)(A)

[Guest boberlander]

If you are not inclined to search the regulations, take this example. I believe your web site and the person you talked to are not using the same definition of vested balance.

You had $100,000 in your account. You took a $5,000 loan. You now have $95,000 plus a $5,000 loan. Still a vested balance of $100,000, as the loan is an asset of the plan. The maximum loan you can take is 50% of $100,000. You've already got $5,000 outstanding, so you can take $45,000.

The 50% of your vested account balance minus 1/2 your loan may be an easy way to understand the calculation. To do the math: 50% of $95,000 = $47,500 less one-half of $5,000 = $45,000 available. You get the same answer.

And, you can be limited depending on what the highest loan balance in the last 12 months was.

[Guest peeage]

Thanks for your replies. I thought the answers I was getting from my plan representative were incorrect, but I wanted to make sure. Thanks again for your help.