Participant Loans In A Troubled Economy. SUNGARD Stephen W. Forbes, J.D. LL.M. Taxation requirements (Code §72(p)). Prohibited transaction requirements (Code §4975) and DOL Regs . Loans must comply with both sets of requirements. Two Sets Of Statutory Rules. Plan Documentation.
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Stephen W. Forbes, J.D. LL.M.
Code §72(p) calculation:$50,000
- 7,500 ($48,500 - $41,000)
December 1, 2009 Loan limit = $42,500
December 1, 2009 Outstanding loan = $41,000
Available loan limit = $1,500
Does Jim’s loan violate amount limitations under Code §72(p)?
Entire period of military service, not just 1 year
Military service does not count against 5 year repayment period
Employee must repay loan and accrued interest by end of 5 year period not counting the military service. Can use full 5 years even if original loan was shorter
Can use same payments with a balloon at the end
Can increase payments to avoid balloonMilitary Leave of Absence