Reporting Qualified Plan Participant Loan Offsets

A provision of the Tax Cuts and Jobs Act of 2017 provides that retirement plan participants who have certain qualified plan loan offset amounts have an extended period of time to roll over these loan offset amounts, as described on page 8 of the Instructions for Forms 1099-R and 5498. The extension applies only to offsets that are a result of plan termination or severance from employment. The 60-day period for rolling over the amount of an “offset” of a plan loan is extended to the tax filing deadline, including extensions, for the tax year in which the offset/distribution occurs.

Form 1099-R – For qualified plan loan offsets from plans such as 401k plans including self-employed solo 401k plans, Code M, Qualified plan loan offset, must be entered in Box 7 of Form 1099-R. If the offset occurs in a designated Roth account, Codes M and B, Designated Roth account distribution, should be entered in Box 7. As noted in the codes table on page 18 of the instructions, Codes 1, 2, 4, or 7 may be used with Code M if applicable.

Form 5498 – Rollovers of qualified plan loan offsets to IRAs are reported on Form 5498 in Box 13a, Postponed/late contributions, and Box 13c, Code. Enter the amount of a qualified plan loan offset rollover in Box 13a, leave Box 13b blank, and enter Code “PO” in Box 13c. If the IRA owner made more than one type of postponed contribution, a separate Form 5498 should be used to report each amount in Box 13a and c.

Finally, for a loan offset that occurs for any other reason (e.g., a plan may have a loan policy provision that offsets a loan upon the participant attaining age 59½), the 60-day time frame is still in effect. so the new 2017 rule would not apply.

SOLO 401(K)