Published in today’s Federal Register are IRS final regulations that implement a provision of the 2017 Tax Cuts and Jobs Act (TCJA) that provides an extended period—beyond the normal 60 days—to roll over amounts of certain retirement plan loans that are offset and treated as distributions. These final regulations were released in pre-publication form on December 8, 2020.
A qualified plan loan offset (QPLO) is a plan loan in good standing that is offset as a result of plan termination or a participant’s severance from employment. The amount of such an offset loan can be rolled over to an IRA or another employer-sponsored retirement plan as late as the participant’s tax return deadline, including extensions, for the tax year when the loan was offset.
A plan loan that is offset for other reasons, such as for a failure to meet required payments while still employed, is not a QPLO and does not qualify for the extended rollover period. The final regulations provide details and examples to help make such determinations.
While these final regulations are considered “effective” with today’s publication, they are only required to be applied to loans that are offset on or after January 1, 2021. As a result, required reporting of QPLOs on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., will first apply to 2021 information returns that are provided to participants and to the IRS in January 2022.
However, taxpayers and information return filers may optionally apply the guidance and report accordingly as of the August 20, 2020, date when the guidance was published in proposed form.