Loan origination fees and 1099-R reporting

[Guest Genny Klocek]

Hi there. Does anyone have knowledge about loan origination fees and 1099-R reporting?

Specifically, I have a client that is coming on board in the Fall. The plan allows for the recordkeeper to deduct a loan origination fee. We intend to deduct $50 from the participant accounts at the time a new loan is issued.

The client is now asking, and in fact is even suggesting, that this $50 loan origination fees amounts to an in-service withdrawal that must be reported on a Form 1099-R.

Any thoughts or guidance?

[Alan Simpson]

The loan origination fee is not an in-service withdrawal. It is a fee paid from the plan that just happens to be allocated to a specific participant instead of to all participants.