May Participants Roll Loans From One 403(b) Plan to Another?

Q: I am a fiduciary for a 403(b) plan sponsor, and a participant approached me asking if she could roll her loan into our 403(b) plan. Our document allows for rollover contributions into the plan, but I could not find any language on loan rollovers. Are they permitted?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Though, technically, loan rollovers are not prohibited, retirement plans generally do not allow them (with some limited exceptions, such as certain plan terminations). The key reason for this is that loan amortizations and repayment schedules are among the most difficult recordkeeping transactions that exist and are, thus, exceedingly difficult to move from one retirement plan provider to another.

That said, the participant may have options with respect to the loan, such as repaying the outstanding balance on termination and rolling over the entire account balance to your plan; maintaining the loan at the prior plan, if the prior plan permits, and continuing to make loan repayments; or indirectly rolling over the loan offset amount.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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