Deemed distribution
Treated-as-distributed amount when a participant loan defaults under IRC Section 72(p).
Definition
A deemed distribution occurs when a participant loan does not meet the IRC Section 72(p) requirements (5-year repayment, level amortization, $50,000/50% limit). The defaulted loan amount becomes taxable income to the participant in the year of default and may carry a 10% early withdrawal penalty if under age 59½. Solo 5500 Desk does not handle deemed distributions.