I have a husband and wife that closed their corp. and terminated the DB plan and rolled their lump sum distributions to a segregated acct. in their new sole proprietorship DC plan. My limited understanding of loans is that loans are not allowed from a qualified plan of a sole proprietorship. If that's true, in this case does it apply to the segregated acct. as well?

EGTRRA has eliminated the restriction on plan loans to sole propreiters for plan years beginning after 12/31/01. I have also read commentaries and other posts on this message which suggest that the IRS will waive prohibited transaction penalties on loans made to self-employed's prior to 1/1/02 if the loan would have been allowed under the new law.