Long-awaited regulations proposed on loans from qualified plans.
The Tax Adviser › Vol. 27 Nbr. 5, May 1996
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Summary
Proposed IRS regulations under IRC section 72(p) released in Dec. 1995 identify how loans from qualified benefit plans can avoid treatment as deemed distributions and the IRC section 4975 excise tax. The loans must be documented in a legally enforceable written agreement. The maximum period of repayment is five years unless the loan is being used for the purchase of a residence and is secured by that residence. Nonpayment of installment payments can result in the entire loan being considered a deemed distribution.
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Long-awaited regulations proposed on loans from qualified plans.
As a result of the tremendous tax burden associated with early distributions from qualified retirement plans, many employers have added provisions that allow participants to borrow from retirement plans with no tax consequences. However, Sec. 4975(d) (1) contains strict rules to be certain that these loans are not prohibited transa...
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