Participant loans: a road map for practitioners

Article Abstract:

The IRS released in Dec 1995 proposed regulations under IRC section 72(p) that identify when 401(k) plan loans to participants will be considered prohibited transactions and when they will be as deemed distributions from the plan subject to taxation. Generally, loans must be available to all participants on a substantially equal basis. Loans must be properly documented, must meet amount limits, must be secured and must have a reasonable rate of interest. Violations of section 72(p) can trigger deemed distribution resulting in excise tax and income tax liability.

Planning, Distribution, Qualified benefit plans, Salary reduction savings plans, 401K plans

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Senator Dole and Rep. Michel introduce pension security legislation

Article Abstract:

Congress has responded to public concern that pension trust underfunding and financial instability have gone up by introducing the Pension Security Act of 1992, which includes provisions dealing with minimum funding requirements. The legislation, introduced in both House and Senate, also clarifies the Pension Benefit Guaranty Corp's (PBGC) financial status in cases of bankruptcy. The law would amend ERISA s. 4068, giving priority to a part of the PBGC's claims for employer liability. The PBGC would also be entitled to membership on the creditors' committee.

Finance, United States. Pension Benefit Guaranty Corp.

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Participant loans: a road map for practitioners

Article Abstract:

The author discusses the laws relating to loans from employee tax-qualifying retirement plans and problems borrowers may face if not properly advised by plan managers.

United States, Taxation

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