IRS proposes regulations on plan loans under s. 72(p)

Article Abstract:

IRS proposed regulations under IRC section 72(p) have added a written agreement requirement to the other restrictions placed on loans from qualified plans to participants under section 72(p). Section 72(p) identifies the amount and payment period limitations placed on loans made from plan funds. Failure to meet these requirements will result in the loan being characterized as a deemed distribution, but the distribution will not trigger plan qualification and distribution rules and the funds will not be eligible for rollover.

Distribution

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Loan from VEBA to related employer is taxable reversion under section 4976

Article Abstract:

The IRS has ruled in GCM 39884 that a loan to a related employer from an IRC 501(c)(9) voluntary employees' beneficiary association (VEBA) is a reversion to the employer taxable in its entirety under IRC 4976. The combination of the very large loan and the non-perfected security interest made the risk of employer default on the loan substantial. This reduced the likelihood that an outside lender would have taken on this loan and indicated that this could have been a sham transaction.

Management, Taxation, Voluntary employees' beneficiary associations, Reversion

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New guidance on plan loans

Article Abstract:

IRS proposed regulations under IRC section 72(p) provide guidance regarding the deemed distribution treatment of qualified retirement plan loans. Loans are treated as distributions if subsection 72(p)(2) requirements are not met. The guidance states that bases are not increased by imputed distributions or accrued interest and that interest is not treated as a distribution.

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