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Loan Distribution

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ByYoung Retiree

L1: Loan DistributionI retired in calendar 2001, but will not plan to begin 72t distributions until calendar 2003. I have an outstanding loan from my retirement plan, and have continued to make payments post retirement. If I sould default on the loan in 2002 and receive “distribution” of the unpaid balance, will that loan distribution impact the taxability of my future 72t distributions? 2002-02-01 07:38, By: Young Retiree, IP: [127.0.0.1]
L2: RE: Loan DistributionI’m assuming that you will be transferring your 401(k) account to an IRA at which time the loan will become taxable income. Based on this premise, it should have no impact on a 72t plan.2002-02-02 14:43, By: Gfw, IP: [127.0.0.1]

L2: Loan Distribution #2Follow-up to my 1st Loan Distribution question. (I guess I left some information out.)My company’s retirement plan offers a program that allows me to keep my assets in the plan, post-retirement. (All assets are pre-tax, company contributions.) I can request plan distributions on any schedule I wish, however not suprisingly, the plan administrators will not calculate my SEPP distribution amount for me.Since the plan still has my assets, including my plan loan, I have been making the loan payments back to the plan for credit to my account. In the event I would stop making the loan payments, the remaing loan principal would be deemed a distribution from the plan.Now that I have explained a little more, back to my original question:Would a deemed loan distribution occurring in calenday 2002 have any impact on the taxability of SEPP that would begin in calendar 2003? In other words, would such a loan distribution prohibit me from avoiding the 10% penalty on future early distributions by prohibiting me from taking SEPP?Thanks for your help. 2002-02-02 16:39, By: Young Retiree, IP: [127.0.0.1]

L2: RE: Loan DistributionNo change in my previous answer. You will pay the 10% on the loan distribution but that should have no impact on a SEPP plan established later.You should however, check with your own tax advisor. You should also with the 401(k) Plan Administrator so you know in advance how they will be completing the 1099 reflecting penalty status of the SEPP distributions to be made to you.2002-02-03 06:15, By: Gfw, IP: [127.0.0.1]

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