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ARTICLE · 12 FEBRUARY 2021

Extended Loan Rollover Timeline: More Flexibility For Participants And More Complexity For Plan Administrators

Seyfarth Shaw LLP
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Seyfarth Synopsis: The IRS released final regulations, under T.D. 9937, that generally adopt the proposed rules relating to qualified plan loan offsets issued last year...

United StatesTax
Jonathan Karelitz
Jonathan Karelitz
Lauren Salas-Mationg
Lauren Salas-Mationg
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Seyfarth Synopsis: The IRS released final regulations, under T.D. 9937, that generally adopt the proposed rules relating to qualified plan loan offsets issued last year, with one modification relating to the applicability date. Plan administrators should be prepared to evaluate whether their systems can properly track qualified plan loan offsets, which must now be specifically identified in any Form 1099-R that is distributed to an employee.

Background

Many defined contribution plans require an outstanding loan balance to be immediately repaid by a participant in certain events, such as termination of the plan, a request for a distribution, or a participant's termination of employment. A failure to timely repay the balance results in a loan default. Once in default following one of these events, a participant's account balance is offset (or reduced) by the amount of his or her outstanding loan balance in satisfaction of that remaining loan balance. This offset

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