Tax Facts

3954 / What requirements must a qualified plan loan meet to avoid taxation as a distribution?



To avoid being taxed as a distribution, a loan made from a plan to a participant or beneficiary must be made pursuant to an enforceable agreement ( Q 3955) that meets certain requirements with respect to the term of the loan ( Q 3956), its repayment ( Q 3957), and the dollar amount loaned ( Q 3958).1 Under the SECURE Act, plan loans cannot be repaid via credit card or similar arrangements.2





1.  IRC § 72(p)(2); Treas. Reg. § 1.72(p)-1, A-3(a).

2.  IRC § 72(p)(2)(D).


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