Participant loans and Form 5500-EZ reporting
What to collect when a Solo 401(k) had a participant loan during the plan year.
Summary
A participant loan can affect the Form 5500-EZ packet even when the year-end balance is zero. The packet should capture whether a participant loan was outstanding during the year and the participant loan amount at year end, while leaving loan design, default, and correction questions outside the product.
Loan facts are recordkeeping facts; loan advice is outside scope.
| During-year loan | Capture yes/noA loan can exist during the year even if repaid by year end. |
|---|---|
| Year-end amount | Use plan loan recordsDo not infer from bank transfers alone. |
| Hard stop | Loan default or correctionOutside the simple on-time packet lane. |
A loan is not just an asset balance
Participant loans have their own record trail. A year-end balance of zero does not prove no loan existed during the year. The packet should preserve both the during-year loan indicator and the year-end participant loan amount.
Do not convert loan review into product advice
The product should not approve loans, calculate whether terms are permitted, decide whether a default occurred, or correct a loan problem. It only organizes fields from records the user already controls.
When to stop
Stop for missed repayments, suspected deemed distributions, refinanced loans, multiple loans with unclear balances, hardship/distribution questions, or any request for investment, fiduciary, or plan-administration advice.
Common questions
Do I report a loan that was fully repaid before year end?
The packet should still ask whether a participant loan was outstanding at any time during the year, because the during-year fact and the year-end amount are separate.
Can Solo 5500 Desk tell me whether my loan is compliant?
No. Loan limits, repayment schedules, defaults, deemed distributions, and correction questions are plan administration or tax review issues outside the MVP.
What records should I keep?
Keep the loan agreement, amortization schedule, repayment records, year-end loan balance support, and any custodian or administrator statements with plan records.