- 3 - In 1990, Edberg prepared a loan policy for the plan which was adopted by petitioner as the sole member of the plan’s Advisory Committee. Pursuant to the policy, a plan participant could apply for a loan in an amount not to exceed one-half of the participant’s nonforfeitable accrued benefit. The maximum aggregate dollar amount of loans outstanding to any one participant, when aggregated with all participant loans from other employer qualified plans, could not exceed $50,000.2 All loans were subject to approval by the plan’s Advisory Committee. In November 1994, petitioner’s nonforfeitable accrued benefit in the plan was $74,376. There is no evidence that he had previously borrowed from the plan. With respect to loans the proceeds of which were to be used by a plan participant to acquire a dwelling that the participant would use as his principal residence, the loan policy permitted a repayment term of up to 15 years. With respect to all other loans, the repayment term could not exceed 5 years. The loan policy specifically provided as follows: Participants should note the law treats the amount of any loan (other than a “home loan”) not repaid five years after the date of the loan as a taxable distribution on the last day of the five year period or, if sooner, at the time the loan is in default. If 2 The $50,000 figure was required to be reduced by the excess of the participant’s highest outstanding loan balance during the 12-month period ending on the date of the loan over the participant’s current outstanding loan balance on the loan date.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011