The IRS has issued final regulations for qualified plan loan offset (QPLO) amounts to implement Section 13613 of the Tax Cuts and Jobs Act (TCJA), which provides an extended rollover period for a QPLO, which is a type of plan loan offset.
A distribution of a plan loan offset amount is a distribution that occurs when, under the plan terms governing the loan, the employee’s accrued benefit is reduced, or offset, in order to repay the loan. Prior to passage of the TCJA, a participant had 60 days to roll over a plan loan offset amount from a 401(k) or 403(b) plan account to an eligible retirement plan that accepts the rollover. The act extended this time period until the due date (with extensions) for filing the participant’s federal income tax return for plan loan offset amounts resulting solely from the participant’s termination of employment or the employer’s termination of the plan, i.e., a QPLO.
The final regulations are the same as the proposed regulations included in a Notice of Proposed Rulemaking (NPRM) the IRS issued in August, except for a change in the applicability date. The IRS had originally said the final rules would be applicable to plan loan offset amounts treated as distributed on or after the date the final regulations were published in the Federal Register. However, a commenter expressed concern that recordkeepers wouldn’t have time to update their systems to be able to meet the 1099-R filing deadlines.
The IRS agreed. The final regulations say, “Under the revised applicability date, the final regulations will apply to plan loan offset amounts, including qualified plan loan offset amounts, treated as distributed on or after January 1, 2021. Thus, for example, the rules in Section 1.402(c)-3 will first apply to 2021 Form 1099-Rs required to be filed and furnished in 2022 (more than one year after the date of publication of the final regulations). This delayed applicability date will give plan administrators and recordkeepers additional time to program systems and otherwise establish procedures for obtaining the exact date of severance from employment of a plan participant and tracking the one-year anniversary of that date.”
The IRS said the applicability date is also revised to provide that taxpayers (including a filer of a Form 1099-R) may apply these regulations with respect to plan loan offset amounts, including qualified plan loan offset amounts, treated as distributed on or after August 20—the date of publication of the proposed regulations.
« New Administration Backs Out of Lawsuit Against CalSavers