Loans From Qualified Plans
Generally, a loan from a qualified employer plan to a participant or beneficiary is treated as a plan distribution unless the loan amount is the lesser of $100,000 (increased by the SECURE 2.0 Act Sec 302(c) from $50,000) or the present value of the employee's nonforfeitable accrued benefit under the plan (changed from “half the present value” by the Act). There is an exception that allows a loan up to $10,000 without regard to the accrued benefit rule and the loan is required to be repaid within five years (longer repayment can be used for a principal residence plan loan). Special rules apply to individuals affected by a qualified disaster:
More Than One Disaster - The $100,000 limitation is applied separately for distributions made with respect to each qualified disaster.
Longer Repayment Period - For loans in existence on or after the first day of the incident period of the qualified disaster:
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If any repayment with respect to such loan occurs during the period beginning on the first day of the qualified disaster’s incident period and ending on the date which is 180 days after the last day of such incident period, the loan’s due date shall be delayed for 1 year.
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Any subsequent repayments of the loan shall be appropriately adjusted to reflect the delay in the due date described just above and any interest accruing during such delay.,
Qualified Individual - For purposes of the relief provided to borrowers of retirement plan loans, the term ‘‘qualified individual’’ means any individual:
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Whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster, and
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Who has sustained an economic loss by reason of such qualified disaster.