Loan Rollover of Offset Loan

Participant terminated 12/31/2018.  In March of 2019 he told a lump sum payment and rolled his benefit to his new employer's plan.

At the time of distribution he had an outstanding loan balance. The recordkeeper issued two 1099Rs, one for the rollover and one for the offset loan amount.

Under the Taxs Cuts and Jobs Act does the  participant have until 4/15/2020 to fund the "outstanding" loan amount to an IRA or his new employer's plan as a rollover contribution?

Any restrictions on funding the outstanding loan balance by the due date of tax return?

My understanding is they would have until the due date of their tax return with extension for the year of loan offset to rollover the loan offset amount. That is if the loan is offset in 2019 you would have up until 10/15/2020 to complete the rollover.

If he's trying to roll it over to the Plan you'll want to make sure the Plan will accept it, if he's trying to rollover to IRA should not be a problem. 

My understanding is the same as Lou S.'s.

Can someone explain the logistics of funding the outstanding loan amount when the person has already received a 1099-R showing the loan as taxable in a prior year?  How does that work?  

For example, per the above:

participant terminated 12/31/18

rolled over account and had loan offset in March 2019, so will receive 2 1099-R forms for 2019, which will show the rollover and the loan offset (which he will report as taxable income on his 2019 taxes.)

But he has until 4/15/2020 to repay the loan.  Suppose he chooses to repay it in early 2020.  He has already had the loan taxed...?  I don't see how this tax law change really benefits someone from a tax perspective but perhaps I am missing something?

12 minutes ago, ACK said:

Can someone explain the logistics of funding the outstanding loan amount when the person has already received a 1099-R showing the loan as taxable in a prior year?  How does that work?  

For example, per the above:

participant terminated 12/31/18

rolled over account and had loan offset in March 2019, so will receive 2 1099-R forms for 2019, which will show the rollover and the loan offset (which he will report as taxable income on his 2019 taxes.)

But he has until 4/15/2020 to repay the loan.  Suppose he chooses to repay it in early 2020.  He has already had the loan taxed...?  I don't see how this tax law change really benefits someone from a tax perspective but perhaps I am missing something?

 

My understanding is that Participant would indicate on the 12/31/2019 return that it has been repaid to another plan or IRA, so the 1099-R issued by the plan is not counted as compensation for 2019. 

The plan still issues the 1099-R, it is not involved with how it is accounted for on the participants return.  

OK, thanks.  I see what you are saying.  :)

I also think there's going to be a new code for the loan default on the 1099, that'll indicate it could be eligible for the new delayed repayment deadline.