A profit sharing contribution (in a daily valued plan) has been allocated and accrued for 12/31/02 to all eligible participants. This contribution is scheduled to be funded on 4/15/03.

A fully vested participant wants to borrow the maximum amount (50%) prior to 4/15/03. The plan's admn. system does not include the accrued ps allocation because it has not yet been funded and it's assets are valued daily. Can the profit sharing allocation be included in determining the maximum (50%) amount that can be borrowed? Our administrator is saying no, because it is a daily valuation plan. I believe the accrued contribution is technically part of their account balance and should be included to determine the 50% amount.

It might not matter if she is saying that the recordkeeping system is "smart" and won't track a loan that is greater than 50% of the balance on the recordkeeping system.

What would you do if the accrued profit sharing is not funded.

I believe that it should not be included since it is not guaranteed to be deposited into the plan - it is only accrued and is subject to change.

An accrued profit sharing contribution is one that has been communicated to participants and is an obligation of the employer. Just because it hasn't been funded does not make the participant's account balance any less. When doing the end of year allocation, the accrued contribution should be allocated even if the amount is not contributed for another 2 1/2 months or longer (up to tax filing date). I see no reason the loan could not be 50% of the end of year (vested) account balance.

Once again I ask, what would you do if the employer does not fund the accrued profit sharing.

While the company may declare the profit sharing amount/contribution that they wish to have, they can of course change their mind and contribute a different amount as long as it falls within the deadline for making the contribution.

Therefore, I would not include it in the amount available for calculating the maximum loan.

I agree with Alan. What would you do in the simplest case, where this is a pure profit sharing plan (employer contribution only, not a 401(k), and calendar 2002 was the first plan year.

Total plan assets (excluding receivables) is zero, and nothing is due in for months. How do you make a loan?

RCK

Yes, I believe you all are correct - I now understand why one should not include any contribution accruals in a participant's account balance when determining the maximum loan limit.

I just simply wondered if it would be acceptable to include an accrual as part of your account balance in determining the max. loan amounts when the employer has clearly committed the contribution amounts and notified particpants of such.

Thanks for all the responses!