Q1. Are there special loan provisions for Coronavirus-Related Distributions if I qualify?
A1. Yes. The CARES Act has two main loan provisions:
An increase in the amounts used to determine the maximum loan amount allowed.
A delay in repayment for new and existing loans.
Q2. What are the changes to the loan maximum calculations?
A2. For any Solo 401k participant loan you initiate from March 27, 2020 through September 22, 2020, you can take out $100,000 or 100% of the vested amount (whichever is less). This is double the normal loan provision (typically $50k or 50% of vested balance).
Q3. What are the loan repayment changes?
A3. New or existing participant loan repayments from March 27, 2020 thru December 31, 2020 can be delayed by a year. Loan payments will restart with any payments due on or after January 1, 2021. The skipped payments (and any interest that accrued on those skipped payments) must be repaid starting on the one-year anniversary of the first skipped payment.
When your loan repayments re-start, your repayment amount will be adjusted to account for the missed interest. Additionally, the maximum repayment period (5 years for most loans) will be extended by the time frame in which payments were skipped.
Q4. Does the Solo 401k have to be amended before the loan provisions are utilized?
A4. No, your Solo 401k may operationally use the loan provisions before the plan is formally amended. The amendment deadline is the last day of the plan year beginning on or after January 1, 2022 (or a later date if specified by the Secretary of the Treasury).