Solo 401(K) Loan
I have a client who has a Solo 401(k). Currently has a TPA. The company (plan sponsor) is no longer in business.
Client has a loan on the Solo 401(K). If client rolls money out of the Solo 401(k) and closes the account, is there a uniform law regarding paying off the loan? Does the client have to pay off the loan within a certain time period? Can the client close the account without paying off the loan?
Permalink Submitted by Alan - IRA critic on Fri, 2019-03-08 04:12
If the business has ceased, the plan must be terminated within a reasonable time (certainly no longer than a year from when business ceased at max) and a 5500 EZ filed regardless of plan balance. The plan balance can then be rolled over, but if the loan has not been repaid there will be an offset distribution and the loan balance will be taxable and subject to penalty. If there has already been a default on the loan payments, it is possible that a deemed distribution should have been processed before the plan is terminated. The TPA should be able to help with the details.