Retirement Plans Newsletter

BULLETIN
August 17, 2020

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[Official Guidance]

Text of IRS Proposed Regs: Rollover Rules for Qualified Plan Loan Offset Amounts

"This document sets forth proposed regulations relating to amendments made to section 402(c) of the Internal Revenue Code by section 13613 of the Tax Cuts and Jobs Act, ... [which] provides an extended rollover period for a qualified plan loan offset [QPLO] ...

"These proposed regulations add Section 1.402(c)-3 to take into account changes to the rollover rules made by section 13613 of TCJA with respect to QPLO amounts.... [T]he proposed regulations confirm that a QPLO is a type of plan loan offset; accordingly, most of the general rules relating to plan loan offset amounts apply to QPLO amounts.... The proposed regulations provide examples to illustrate the interaction of the special rules for QPLOs with the general rules for plan loan offsets....

"Consistent with Section 1.402(c)-2, Q&A-9, the proposed regulations provide that a distribution of a plan loan offset amount that is an eligible rollover distribution and not a QPLO amount may be rolled over by the employee (or spousal distributee) to an eligible retirement plan ... within the 60-day period set forth in section 402(c)(3)(A). While a plan loan offset generally is subject to this 60-day rollover period, there are special rules for the waiver of the 60-day rollover deadline....

"Consistent with the amended provisions of section 402(c)(3)(C), the proposed regulations provide that a distribution of a plan loan offset amount that is an eligible rollover distribution and a QPLO amount may be rolled over by the employee (or spousal distributee) to an eligible retirement plan through the period ending on the individual's tax filing due date (including extensions) for the taxable year in which the offset is treated as distributed from a qualified employer plan....

"Consistent with Section 1.402(c)-2, Q&A-9(b), the proposed regulations provide that a plan loan offset amount is the amount by which, under plan terms governing a plan loan, an employee's accrued benefit is reduced (offset) in order to repay the loan (including the enforcement of the plan's security interest in the employee's accrued benefit). A distribution of a plan loan offset amount is an actual distribution, not a deemed distribution under section 72(p)....

"The proposed regulations provide several special rules for purposes of determining whether a plan loan offset amount is a QPLO amount....

"Taxpayers ... may rely on these proposed regulations with respect to plan loan offset amounts, including qualified plan loan offset amounts, treated as distributed on or after [the date these proposed regulations are published in the Federal Register, currently scheduled for Aug. 20, 2020]."

Internal Revenue Service [IRS]

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Lois Baker, J.D., President  loisbaker@benefitslink.com
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