Proposed Regs on Post-TCJA Qualified Plan Loan Offsets, Aug. 27, 2020

The IRS proposed regulations help clients with timing for rollover of qualified plan loan offset amounts. The ability to take a qualified plan loan can offer a valuable source of funding in an emergency. However, plan loans are governed by strict repayment rules. Violations can result in the participant's account balance being reduced (offset) to repay the unpaid balance (after which it is treated as a taxable distribution). These rules are problematic if the employee is terminated or if the plan itself is terminated. TCJA gave these employees extra time to roll over qualified plan loan amounts to prevent unintended consequences. Instead of the 60-day rollover period, the borrower has until the income tax filing deadline to rollover the offset amount. The regulations provide that if the taxpayer files on time, an additional six-month window to complete the rollover will apply even if the taxpayer doesn't request the extension. For more information, visit Tax Facts Online.