IRS Provides Guidance On Plan Loan Offsets

The Tax Cuts and Jobs Act of 2017 (TCJA) provided certain participants with more time to rollover certain types of plan loan offsets. The Internal Revenue Service (IRS) has issued proposed regulations, which may currently be relied on, providing guidance on which participants qualify and the application of the provisions.

At the time a plan loan becomes immediately due and payable and the loan is not repaid by the participant, the loan is treated as either a "deemed distribution" or a "loan offset." Usually this repayment failure occurs when a participant severs employment or the plan terminates. If the participant has a distribution event at the time the loan is not repaid, it is treated as a "loan offset" and an actual distribution. In most situations this loan offset distribution would qualify as an eligible rollover distribution. A deemed distribution, which might occur if the participant stops making loan repayments but has not severed employment, would not be