Participant Loan for a new employee

A 401k plan has a year of service requirement to enter the plan.  However, employees can roll money into the plan before they hit that year of service.

Can an individual who does that, rolls money into the plan before their YOS, take a loan from that rollover?  

I would think they could not since they are "participant" loans and the individual is not a participant yet.    Or is s/he?

Thank you

Step One is Read The Fabulous Documents, perhaps including a written loan procedure if it is a document governing the plan.

If a complete and fair reading of the plan’s governing documents results in an ambiguity about what the plan permits or restricts, the administrator might use its discretionary power to interpret the plan.

If interpretation is called for, consider, with other points, that a plan’s governing documents might not have one all-encompassing defined term for “participant”. Some documents recognize that a person might be a “participant” regarding some kinds of allocations but not for other kinds.

For example, if a plan’s provisions make a person eligible for a rollover-in subaccount, an administrator might interpret whether such a person is a participant for that subaccount.

Consider also that some recordkeepers, TPAs, and other service providers get agreements that allow the service provider to rely on the service recipient’s instructions about what the plan provides, often stored as a computer database, even if the service provider knows those instructions are contrary to the plan’s governing documents.

This is not advice to anyone.

Agree to read the document. It will include the sources from which loans can be issued. I’ll be shocked if Rollover account isn’t one of them. 
 

I would also be shocked if someone with a Rollover account isn’t included as a participant even if they haven’t met the eligibility for other sources. 

In addition to the excellent points raised above, how has the plan administrator previously interpreted the term "particiant" with respct to eligibility to take loans? If employees who have not yet satisified the year osf service and have rolled over balances fro other plans have been permitted to take loans fom their rollover accounts, that is the administrator's interpretation and would set a precedent for considering such an employee eligible to take a loan as to that amount.

The document that we use is pretty clear that an "Eligible Employee" may roll money into the plan, but only an active "Participant" can request a loan.