Qualified Plan Loan Offset Rollover Rules Proposed by IRS

The IRS has released a notice of proposed rulemaking that takes into account changes made by the Tax Cuts and Jobs Act (TCJA) with respect to rollover rules for qualified plan loan offset (QPLO) amounts. The TCJA, enacted in December 2017, amended the Internal Revenue Code to extend the timeframe for rolling over QPLO amounts to an eligible retirement plan up to the individual’s tax filing due date (including extensions) for the taxable year in which the offset occurs.

A QPLO amount is a plan loan offset amount that is treated as distributed from a qualified retirement plan to an employee or beneficiary for one of two reasons: 1) the termination of the qualified employer plan, or 2) the failure to meet the repayment terms of the loan from such plan because of the employee’s severance from employment.

The proposed regulations, among other things, clarify the rollover period for plan loan offset amounts, and provide details and examples distinguishing the treatment of a plan loan offset versus a QPLO.

There is a 45-day comment period after publication in the Federal Register.