Ananda created a topic in Distributions and Loans, Other than QDROs
"A plan participant under age 59 and 1/2 has recently become permanently and totally disabled. He has 100,000 cash in his 401(k) plan and a 40,000 loan. He wants to withdraw his entire account balance because of dire financial hardship. The plan provides that upon disability the plan participant can withdraw the entire account balance. The plan does not deem that the loan must be paid under these circumstances and the loan is not in default.
Here, even though the participant is under 59 and 1/2 there will be no 10% penalty given total and permanent disability. The participants total account balance should be $140,000, i.e., 100,000 cash and a 40,000 note receivable. However, upon distribution he will only be in receipt of $100,000 cash and not the note receivable. However, if he withdraws the $100,000 cash is this deemed a loan offset of $40,000 ($140,000 account balance less
$100,000) that is included in taxable income? However, my understanding is that a loan offset only occurs if the loan is in default and here it is not. If it's not a loan offset then it's a $100,000 taxable distribution with a $40,000 loan outstanding with the plan. So the participant can ether try to make loan payments or preferably let the loan go into default whereupon its a deemed distribution not subject to the 10% penalty. Another
possibility is due to concerns that the IRS may challenge his permanent and total disability diagnosis, he may decide to take a $100,000 hardship withdrawal and let the loan go into default and accept the deemed distribution. Any thoughts on this analysis especially regarding this not being a loan offset?"
Jakyasar created a topic in Defined Benefit Plans, Including Cash Balance
"Hi Company A is a medical office, small i.e. less than 25 active participants. Owned 100% by MD MD also owns couple of restaurants with employees. 2 part question: Q1: If all included in the DB plan, Company A being the sponsor and the restaurants being adopting employers, is this DB plan covered by PBGC? The total active participants will still be under 25. Q2: If only Company A adopts the plan and excludes the restaurants, no PBGC