Proposed Regs. explain when plan loans are taxable
Article Abstract:
Proposed Regulations can be used as a guide on handling loans from qualified plans. In general, a loan from a qualified plan, or the allocation or commitment of a beneficiary's interest in the plan, is considered a distribution from the plan. However, Sec. 72(p) allows exception if the loan does not generate plan loans that exceed $50,000 or over 50% of the accrued benefit of the participant, and if the loan is repaid within five years with significantly level amortization and quarterly or more frequent payments. The Proposed Regulations indicate that a plan loan must be supported by a legally executable written agreement that includes the required term and amortization provisions. Violation of such requirements transforms the loan into a deemed distribution at the outset. Only the excess can be considered a distribution if the loan has the necessary terms but goes over the applicable limit.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1996
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Qualified plans face new rollover and withholding rules
Article Abstract:
The treatment of distributions from tax-qualified plans has been considerably altered by the passage of the Unemployment Compensation Amendments (UCA) in Jul 1992. For post-1992 distributions, the UCA requires tax-qualified plans whose distributions qualify for rollover treatment to allow plan participants to directly roll over such distributions to their individual retirement accounts or to another plan. Distributions will be subject to obligatory 20% Federal income tax withholding if they are not directly rolled over. Plan administrators are required to furnish recipients with written explanations of the rollover regulations, the special tax treatment of lump-sum distributions, the direct rollover option and the obligatory income tax withholding on distributions if the recipients choose not to exercise their direct rollover option.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1993
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