Distribution from terminated plan
Prospects company is terminating its 401k plan. He has an outstanding loan.
Any strategy to roll the balance into an IRA and repay the outstanding loan balance back into the IRA?
Thanks
Prospects company is terminating its 401k plan. He has an outstanding loan.
Any strategy to roll the balance into an IRA and repay the outstanding loan balance back into the IRA?
Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2022-09-02 15:04
If prospect’s plan balance less the outstanding loan is distributed there will be a 1099R coded M issued by the plan for the outstanding loan balance, and prospect will have until the due date plus extensions for the tax return to roll replacement funds into an IRA. That gives prospect several months, in some cases over a year to come up with the rollover funds. When the rollover is contributed to an IRA the IRA custodian must be told that the source of the funds is a qualified plan loan offset amount, and the year that the plan distribution was made. The IRA custodian will then report this info on Form 5498.