Participant loans and Form 5500-EZ reporting
What to collect when a Solo 401(k) had a participant loan during the plan year.
Summary
If a participant loan was outstanding at any point during the plan year, Form 5500-EZ requires both the year-end loan balance and a yes/no during-year indicator. The IRS loan limit is the lesser of $50,000 or 50% of vested balance. Example: a $40,000 loan taken on March 1, 2025 and fully repaid on November 30, 2025 still requires the during-year flag set to YES with a $0 year-end balance. A missed quarterly repayment can convert the loan to a deemed distribution — exit the EZ lane.
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.
Related guides
Form 5500-EZ example for a one-participant Solo 401(k)
An illustrative source-record example showing how a simple Solo 401(k) packet is organized before filing Form 5500-EZ.
Participant loan balance on Form 5500-EZ
A narrow guide for participant loan records, year-end balance, and when loan issues push a Solo 401(k) case outside simple packet preparation.
Do I need to file Form 5500-EZ for my Solo 401(k)?
The direct filing test for one-participant plans: asset threshold, final year, deadline, and filing method.