Tax Facts

3984 / When is a plan loan exempted from the prohibited transaction rules?

Loans made to plan participants and beneficiaries generally are exempted from the prohibited transaction rules if the loans:

(1)  are made available to all participants and beneficiaries on a reasonably equivalent basis,

(2)  are not made available to highly compensated employees ( Q 3930) in an amount greater than the amount made available to other employees,

(3)  are made in accordance with specific provisions regarding such loans set forth in the plan,

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