Loans

Not all retirement plans contain a loan provision.  Please check your plan document or call Professional Benefit Services, Inc. if you are unsure if your retirement plan permits loans.  Please be aware there is a $75 processing fee charged for each loan.

If your retirement plan does allow loans, there are some general IRS loan limitations and additional limitations may be stipulated by the plan's loan policy.  Loans, if permitted, are limited by IRS to 50% of the participant's vested balance.   Participants may take up to 50% of their deferral balance since they are always fully vested in any deferral contributions they have made to the plan.  Any contributions made by the employer may be subject to a vesting schedule.   Participants would only be entitled to take a loan of 50% of their vested balance of any employer funds.  IRS also limits individuals to a maximum of $50,000 in loans in any 12 month period.  The number of loans allowed per individual and the minimum loan amount (commonly $1,000 for most plans) is stipulated by the individual plan's loan policy.  Please check the plan's loan policy before requesting a loan.

Once a loan is processed, loan payments are to be payroll deducted according to the loan amortization schedule.  Failure to make timely payments on the loan may cause the loan to be in default.  Once a loan is in defaulted it becomes a taxable event to the participant.

Please indicate the payroll frequency for payments on the loan form where indicated.  If a payroll frequency is not indicated, a default frequency of "monthly" will be used for calculation of the amortization schedule. There will be a $25 fee to rerun amortization schedules due to an incorrect payroll frequency indicated on the form.

If you would like to take out a retirement plan loan (and your retirement plan does allow loans), please complete an Application for Participant Loan.

Related Facts

• Up to 50% of your vested balance may be available for a loan.
• Loans are paid back post-tax through payroll deductions.
• If you default on your loan it becomes a taxable event.
• IRS limits individuals to a maximum of $50,000 in a loans in a 12-month period.