464 Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Rules and Regulations 

1Under section 72(p)(4), a qualified employer 

plan means a qualified plan, a section 403(a) 

annuity plan, a section 403(b) plan, and any 

governmental plan. 

2Note that the 60-day rollover deadline can also 

be extended to provide temporary relief during a 

disaster or an emergency response. For example, in 

response to the COVID–19 pandemic, Notice 2020– 

23, 2020–18 I.R.B. 742, extended the 60-day 

rollover deadline to July 15, 2020, for distributions 

made between April 1, 2020, and July 14, 2020. 

special circumstances justify a different 

compliance date. Thus, affected parties 

do not need time to prepare before the 

rule takes effect. Therefore, we find 

good cause for this final rule to become 

effective on the date of publication of 

this action. 

The new uniform compliance date 

will apply only to final FDA food 

labeling regulations that require changes 

in the labeling of food products and that 

publish on or after January 1, 2021, and 

on or before December 31, 2022. Those 

regulations will specifically identify 

January 1, 2024, as their compliance 

date. All food products subject to the 

January 1, 2024, compliance date must 

comply with the appropriate regulations 

when initially introduced into interstate 

commerce on or after January 1, 2024. 

If any food labeling regulation involves 

special circumstances that justify a 

compliance date other than January 1, 

2024, we will determine for that 

regulation an appropriate compliance 

date, which will be specified when the 

final regulation is published. 

Dated: December 29, 2020. 

Stephen M. Hahn, 

Commissioner of Food and Drugs. 

Dated: December 30, 2020. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2020–29273 Filed 12–31–20; 4:15 pm] 

BILLING CODE 4164–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9937] 

RIN 1545–BP46 

Rollover Rules for Qualified Plan Loan 

Offset Amounts 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document sets forth final 

regulations relating to amendments 

made to section 402(c) of the Internal 

Revenue Code (Code) by section 13613 

of the Tax Cuts and Jobs Act (TCJA). 

Section 13613 of TCJA provides an 

extended rollover period for a qualified 

plan loan offset, which is a type of plan 

loan offset. These regulations affect 

participants, beneficiaries, sponsors, 

and administrators of qualified 

employer plans. 

DATES: 

Effective Date: These regulations are 

effective on January 6, 2021. 

Applicability Date: For date of 

applicability, see § 1.402(c)–3(b)(2). 

FOR FURTHER INFORMATION CONTACT: 

Naomi Lehr at (202) 317–4102, Vernon 

Carter at (202) 317–6799, or Pamela 

Kinard at (202) 317–6000 (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document amends 26 CFR part 1, 

by adding § 1.402(c)–3 to the Income 

Tax Regulations to reflect changes to 

section 402(c) of the Code, as amended 

by section 13613 of TCJA (Pub. L. 115– 

97 (131 Stat. 2054)). 

1. Plan Loans, Eligible Rollover 

Distributions, and Plan Loan Offset 

Amounts 

Section 72(p)(1) of the Code provides 

that if, during any taxable year, a 

participant or beneficiary receives 

(directly or indirectly) any amount as a 

loan from a qualified employer plan (as 

defined in section 72(p)(4)(A)),1 that 

amount shall be treated as having been 

received by the individual as a 

distribution from the plan. For certain 

plan loans, section 72(p)(2) provides an 

exception to the general treatment of 

loans as distributions under section 

72(p)(1). 

For the exception under section 

72(p)(2) to apply so that a plan loan is 

not treated as a distribution under 

section 72(p)(1) for the taxable year in 

which the loan is received, the loan 

generally must satisfy three 

requirements: 

(1) The loan, by its terms, must satisfy 

the limits on loan amounts, as described 

in section 72(p)(2)(A); 

(2) The loan, by its terms, generally 

must be repayable within 5 years, as 

described in section 72(p)(2)(B); and 

(3) The loan must require 

substantially level amortization over the 

term of the loan, as described in section 

72(p)(2)(C). 

Section 401(a)(31) requires that a plan 

qualified under section 401(a) provide 

for the direct transfer of eligible rollover 

distributions. A similar rule applies to 

section 403(a) annuity plans, section 

403(b) tax-sheltered annuities, and 

section 457 eligible governmental plans. 

See generally sections 403(a)(1), 

403(b)(10), and 457(d)(1)(C). 

Sections 402(c)(3) and 408(d)(3) 

provide that any amount distributed 

from a qualified plan or individual 

retirement account or annuity (IRA) will 

be excluded from income if it is 

transferred to an eligible retirement plan 

no later than the 60th day following the 

day the distribution is received. A 

similar rule applies to section 403(a) 

annuity plans, section 403(b) taxsheltered annuities, and section 457 

eligible governmental plans. See 

generally sections 403(a)(4)(B), 

403(b)(8)(B), and 457(e)(16)(B). 

Sections 402(c)(3)(B) and 408(d)(3)(I) 

provide that the Secretary may waive 

the 60-day rollover requirement ‘‘where 

the failure to waive such requirement 

would be against equity or good 

conscience, including casualty, disaster, 

or other events beyond the reasonable 

control of the individual subject to such 

requirement.’’ See generally Rev. Proc. 

2020–46, 2020–45 I.R.B. 995, which sets 

forth a self-certification procedure that 

taxpayers may use in certain 

circumstances to claim a waiver of the 

60-day deadline for completing a 

rollover under section 402(c)(3)(B) or 

408(d)(3)(I), and Rev. Proc. 2020–4, 

2020–1 I.R.B. 148, which sets forth 

procedures that taxpayers may use to 

request a waiver of the 60-day rollover 

deadline by submitting a request for a 

private letter ruling.2

Section 1.402(c)–2, Q&A–3(a), 

provides that, unless specifically 

excluded, an eligible rollover 

distribution means any distribution to 

an employee (or to a spousal distributee 

described in § 1.402(c)–2, Q&A–12(a)) of 

all or any portion of the balance to the 

credit of the employee in a qualified 

plan. Section 1.402(c)–2, Q&A–3(b), 

provides that certain distributions (for 

example, required minimum 

distributions under section 401(a)(9)) 

are not eligible rollover distributions. 

Section 1.402(c)–2, Q&A–9(a), 

provides that a distribution of a plan 

loan offset amount (as defined in 

§ 1.402(c)–2, Q&A–9(b)) is an eligible 

rollover distribution if it satisfies 

§ 1.402(c)–2, Q&A–3. Thus, an amount 

not exceeding the plan loan offset 

amount may be rolled over by the 

employee (or spousal distributee) to an 

eligible retirement plan within the 60- 

day period described in section 

402(c)(3), unless the plan loan offset 

amount fails to be an eligible rollover 

distribution for another reason. 

Section 1.402(c)–2, Q&A–9(b), 

provides that a distribution of a plan 

loan offset amount is a distribution that 

occurs when, under the plan terms 

governing the loan, the employee’s 


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Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Rules and Regulations 465 

3 In addition to TCJA, other statutory provisions 

may extend the period to roll over a plan loan 

offset. For example, section 2202(a) of the 

Coronavirus Aid, Relief, and Economic Security 

Act, Public Law 116–136, 134 Stat. 281 (2020) 

(CARES Act), permits an individual to receive from 

an eligible retirement plan up to $100,000 for a 

coronavirus-related distribution (which may 

include a plan loan offset that otherwise meets the 

requirements to be a coronavirus-related 

distribution). A qualified individual with a 

coronavirus-related distribution (which may be 

included in gross income ratably over the 3-year 

period beginning with the taxable year of the 

distribution) may recontribute up to the amount of 

the distribution to an applicable eligible retirement 

plan in which the individual is a beneficiary and 

to which a rollover can be made. For further 

information relating to the interaction of section 

2202 of the CARES Act and plan loan offsets, see 

Notice 2020–50, 2020–28 I.R.B. 35. 

4For a detailed discussion of the application of 

§ 301.9100–2(b) (which provides rules for automatic 

six-month extensions to make regulatory or 

statutory elections) to the extended rollover period 

for QPLO amounts, see the preamble discussion in 

the Explanation of Provisions section of the QPLO 

proposed regulations, under the heading, Rollover 

Period for Plan Loan Offset Amounts, Including 

QPLO Amounts. 

accrued benefit is reduced (offset) in 

order to repay the loan. This may occur 

when, for example, the terms governing 

a plan loan require that, in the event of 

an employee’s termination of 

employment or request for a 

distribution, the loan is to be repaid 

immediately or treated as in default. A 

plan loan offset may also occur when, 

under the terms of the plan loan, the 

loan is canceled, accelerated, or treated 

as if it is in default (for example, if the 

plan treats a loan as in default upon an 

employee’s termination of employment 

or within a specified period thereafter). 

See also § 1.72(p)–1, Q&A–13(a)(2). 

Because a plan loan offset is an actual 

distribution for purposes of the Code, 

not a deemed distribution under section 

72(p), a plan loan offset cannot occur 

prior to a distributable event. See 

generally § 1.72(p)–1, Q&A–13(b). 

2. Qualified Plan Loan Offset Amounts 

Section 13613 of TCJA amended 

section 402(c)(3) of the Code to provide 

an extended rollover deadline for 

qualified plan loan offset (QPLO) 

amounts (as defined in section 

402(c)(3)(C)(ii)).3 Any portion of a QPLO 

amount (up to the entire QPLO amount) 

may be rolled over to an eligible 

retirement plan by the individual’s tax 

filing due date (including extensions) 

for the taxable year in which the offset 

occurs. 

A QPLO amount is defined in section 

402(c)(3)(C)(ii) as a plan loan offset 

amount that is treated as distributed 

from a qualified employer plan to an 

employee or beneficiary solely by 

reason of: 

(1) The termination of the qualified 

employer plan, or 

(2) The failure to meet the repayment 

terms of the loan from such plan 

because of the severance from 

employment of the employee. 

In addition, section 402(c)(3)(C)(iv) 

provides that the extended rollover 

period will not apply ‘‘to any plan loan 

offset amount unless such plan loan 

offset amount relates to a loan to which 

section 72(p)(1) does not apply by 

reason of section 72(p)(2).’’ 

Section 301.9100–2(b) of the 

regulations provides rules for automatic 

six-month extensions to make regulatory 

or statutory elections. Under this rule, a 

taxpayer will receive an automatic 

extension of 6 months from the due date 

of a return, excluding extensions, to 

make elections that otherwise must be 

made by the due date of the return plus 

extensions, provided that: 

(1) The taxpayer’s return was timely 

filed for the year the election should 

have been made; and 

(2) The taxpayer takes appropriate 

corrective action within the six-month 

period. 

Section 301.9100–2(b) further 

provides that paragraph (b) does not 

apply to regulatory or statutory elections 

that must be made by the due date of the 

return excluding extensions. 

Notice of Proposed Rulemaking 

1. In General 

On August 20, 2020, the Department 

of the Treasury (Treasury Department) 

and the IRS published a notice of 

proposed rulemaking (REG–116475–19) 

in the Federal Register (85 FR 51369) 

setting forth rules in new § 1.402(c)–3 

for qualified plan loan offsets (QPLO 

proposed regulations). As described in 

the background of the preamble to the 

QPLO proposed regulations, the 

Treasury Department and IRS anticipate 

providing separate guidance with 

respect to Division O of the Further 

Consolidated Appropriations Act of 

2020, Public Law 116–94 (133 Stat. 

2534), titled ‘‘Setting Every Community 

Up for Retirement Enhancement Act of 

2019’’ (SECURE Act). As part of that 

guidance, the Treasury Department and 

IRS anticipate amending § 1.402(c)–2 to 

reflect changes made by section 114 of 

the SECURE Act (relating to changes to 

section 401(a)(9) of the Code to the 

required beginning date applicable to 

section 401(a) plans and other eligible 

retirement plans described in section 

402(c)(8)) and to add new level 

designations for each paragraph in the 

questions and answers to satisfy Federal 

Register requirements. It is anticipated 

that § 1.402(c)–3, which includes both 

the new QPLO rules and already 

existing plan loan offset rules in Q&A– 

9 of § 1.402(c)–2, will be combined with 

§ 1.402(c)–2 in connection with that 

project (including replacing Q&A–9 of 

§ 1.402(c)–2 with paragraph (a) of 

§ 1.402(c)–3). 

As an initial matter, the QPLO 

proposed regulations confirm that a 

QPLO is a type of plan loan offset; 

accordingly, most of the general rules 

relating to plan loan offset amounts 

apply to QPLO amounts. For example, 

the rule that a plan loan offset amount 

is an eligible rollover distribution 

applies to a QPLO amount. In addition, 

the rules in § 1.401(a)(31)–1, Q&A–16 

(guidance concerning the offering of a 

direct rollover of a plan loan offset 

amount), and § 31.3405(c)–1, Q&A–11 

(guidance concerning special 

withholding rules with respect to plan 

loan offset amounts), applicable to plan 

loan offset amounts in general, apply to 

QPLO amounts. The QPLO proposed 

regulations provide examples to 

illustrate the interaction of the special 

rules for QPLOs with the general rules 

for plan loan offsets. 

2. Rollover Period for Plan Loan Offset 

Amounts, Including QPLO Amounts 

Section 1.402(c)–3(a)(2)(ii)(A) of the 

QPLO proposed regulations provides 

that a distribution of a plan loan offset 

amount that is an eligible rollover 

distribution and not a QPLO amount 

may be rolled over by the employee (or 

spousal distributee) to an eligible 

retirement plan (as defined in section 

402(c)(8)(B)) within the 60-day period 

set forth in section 402(c)(3)(A). While 

a plan loan offset generally is subject to 

this 60-day rollover period, there are 

special rules for the waiver of the 60- 

day rollover deadline. 

Section 1.402(c)–3(a)(2)(ii)(B) of the 

QPLO proposed regulations provides 

that a distribution of a plan loan offset 

amount that is an eligible rollover 

distribution and a QPLO amount may be 

rolled over by the employee (or spousal 

distributee) to an eligible retirement 

plan through the period ending on the 

individual’s tax filing due date 

(including extensions) for the taxable 

year in which the offset is treated as 

distributed from a qualified employer 

plan. Thus, a taxpayer with an eligible 

rollover distribution that is a QPLO 

amount may roll over any portion of the 

distribution to an eligible retirement 

plan, including another qualified 

retirement plan (if that plan permits) or 

an IRA, by the taxpayer’s deadline for 

filing income taxes for the year of the 

distribution, including extensions.4


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466 Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Rules and Regulations 

5The Instructions to the 2020 Form 1099–R 

provide that if an employee’s accrued benefit is 

offset to repay a loan (a plan loan offset amount), 

the administrator should report the distribution as 

an actual distribution and not use Code L (for 

deemed distributions) in box 7. For a QPLO 

amount, the Instructions to the 2020 Form 1099–R 

provide that the administrator should enter Code M 

(for QPLO amounts) in box 7. 

3. Definitions of Plan Loan Offset 

Amount, QPLO Amount, and Qualified 

Employer Plan 

Section 1.402(c)–3(a)(2)(iii)(A) of the 

QPLO proposed regulations provides 

that a plan loan offset amount is the 

amount by which, under plan terms 

governing a plan loan, an employee’s 

accrued benefit is reduced (offset) in 

order to repay the loan (including the 

enforcement of the plan’s security 

interest in the employee’s accrued 

benefit). A distribution of a plan loan 

offset amount is an actual distribution, 

not a deemed distribution under section 

72(p). 

Section 1.402(c)–3(a)(2)(iii)(B) of the 

QPLO proposed regulations defines a 

QPLO amount as a plan loan offset 

amount that satisfies two requirements. 

First, the plan loan offset amount must 

be treated as distributed from a qualified 

employer plan to an employee or 

beneficiary solely by reason of the 

termination of the qualified employer 

plan, or the failure to meet the 

repayment terms of the loan from such 

plan because of the severance from 

employment of the employee. Second, 

the plan loan offset amount must relate 

to a plan loan that met the requirements 

of section 72(p)(2) immediately prior to 

the termination of the qualified 

employer plan or the severance from 

employment of the employee, as 

applicable. 

Section 1.402(c)–3(a)(2)(iii)(C) of the 

QPLO proposed regulations define a 

qualified employer plan, for purposes of 

the QPLO amount definition, as a 

qualified employer plan as defined in 

section 72(p)(4). 

4. Special Rules for QPLO 

Determinations 

Section 1.402(c)–3(a)(2)(iv) of the 

QPLO proposed regulations provides 

several special rules for purposes of 

determining whether a plan loan offset 

amount is a QPLO amount. First, the 

QPLO proposed regulations provide that 

whether an employee has a severance 

from employment with the employer 

that maintains the qualified employer 

plan is determined in the same manner 

as under § 1.401(k)–1(d)(2). Thus, an 

employee has a severance from 

employment when the employee ceases 

to be an employee of the employer 

maintaining the plan. 

Second, the QPLO proposed 

regulations provide that a plan loan 

offset amount is treated as distributed 

from a qualified employer plan to an 

employee or beneficiary solely by 

reason of the failure to meet the plan 

loan repayment terms because of 

severance from employment if the plan 

loan offset: 

(1) Relates to a failure to meet the 

repayment terms of the plan loan, and 

(2) Occurs within the period 

beginning on the date of the employee’s 

severance from employment and ending 

on the first anniversary of that date. 

Whether a plan loan offset amount is 

a QPLO amount is relevant to plan 

administrators because those 

administrators are responsible for 

reporting whether a distribution is a 

plan loan offset amount or a QPLO 

amount on Form 1099–R, Distributions 

From Pensions, Annuities, Retirement or 

Profit-Sharing Plans, IRAs, Insurance 

Contracts, etc., and furnishing that form 

to the taxpayer.5 In the QPLO proposed 

regulations, the Treasury Department 

and the IRS indicated that the proposed 

12-month rule would assist plan 

administrators in identifying QPLO 

amounts by providing a bright-line rule 

for determining whether a plan loan 

offset amount following a severance 

from employment satisfies the first 

requirement in § 1.402(c)–3(a)(2)(iii)(B) 

to be a QPLO amount. 

The QPLO proposed regulations 

proposed to apply the subsequent final 

regulations to plan loan offset amounts, 

including qualified plan loan offset 

amounts, treated as distributed on or 

after the date of publication of a 

Treasury decision adopting the 

proposed rules as final regulations. The 

preamble to the QPLO proposed 

regulations also stated that taxpayers 

(including a filer of a Form 1099–R) may 

rely on the proposed regulations with 

respect to plan loan offset amounts, 

including qualified plan loan offset 

amounts, treated as distributed on or 

after August 20, 2020, and before the 

date the regulations are published as 

final regulations in the Federal Register. 

The Treasury Department and the IRS 

received one written comment relating 

to the QPLO proposed regulations. No 

request for a public hearing was made, 

and no public hearing was held. After 

consideration of the comment, this 

Treasury decision adopts the QPLO 

proposed regulations with one 

important modification relating to the 

applicability date. 

Summary of Comments and 

Explanation of Revisions 

The commenter stated that the brightline 12-month rule in the QPLO 

proposed regulations is a helpful 

approach in determining whether a plan 

loan offset amount is a QPLO amount, 

but expressed concern that 

recordkeepers may not currently have 

procedures to track a terminated 

employee’s date of severance or the oneyear anniversary of that date. To address 

this concern, the commenter 

recommended that the Treasury 

Department and the IRS (i) consider an 

alternative bright-line rule under which 

a plan loan offset amount is treated as 

satisfying the requirement in § 1.402(c)– 

3(a)(2)(iv)(B) if the plan loan offset 

occurs by the end of the year following 

the calendar year in which the 

employee has a severance from 

employment, and (ii) delay by one year 

the effective date of the final regulations 

(or, alternatively, provide for a one-year 

period of time during which a person 

responsible for reporting a QPLO 

amount on Form 1099–R will not be 

viewed as improperly reporting it, 

provided that a reasonable, good faith 

effort is made to determine if a plan 

loan offset is a QPLO). 

With respect to the first 

recommendation, the Treasury 

Department and the IRS have 

considered the alternative bright-line 

rule suggested by the commenter, but 

have retained in the final regulations the 

12-month rule in § 1.402(c)– 

3(a)(2)(iv)(B) of the QPLO proposed 

regulations. Although the 12-month rule 

is a bright-line rule that may assist plan 

administrators and recordkeepers in 

satisfying their reporting obligations, it 

is also an interpretation of a statutory 

requirement that should apply to all 

taxpayers in the same manner. The 

alternative rule recommended by the 

commenter could result in significantly 

different treatment of participants based 

solely on when during a calendar year 

each participant severs from 

employment. For example, Taxpayer A, 

who severs from employment on 

December 31, 2020, could experience a 

plan loan offset during a 366-day period 

following the severance and be treated 

as having a QPLO (and thus be eligible 

for the extended rollover rule), whereas 

Taxpayer B, who severs from 

employment one day later, on January 1, 

2021, could experience a plan loan 

offset during a 729-day period and 

receive the same treatment. 

With respect to the commenter’s 

second recommendation to delay the 

effective date of the final regulations, 

the Treasury Department and the IRS 


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Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Rules and Regulations 467 

agree that additional time to implement 

§ 1.402(c)–3 is appropriate. Accordingly, 

the applicability date in these final 

regulations is revised from the QPLO 

proposed regulations, which had 

proposed to apply the regulations to 

plan loan offset amounts treated as 

distributed on or after the date of 

publication of final regulations. Under 

the revised applicability date, the final 

regulations will apply to plan loan offset 

amounts, including qualified plan loan 

offset amounts, treated as distributed on 

or after January 1, 2021. Thus, for 

example, the rules in § 1.402(c)–3 will 

first apply to 2021 Form 1099–Rs 

required to be filed and furnished in 

2022 (more than one year after the date 

of publication of the final regulations). 

This delayed applicability date will give 

plan administrators and recordkeepers 

additional time to program systems and 

otherwise establish procedures for 

obtaining the exact date of severance 

from employment of a plan participant 

and tracking the one-year anniversary of 

that date. 

The applicability date in these final 

regulations is also revised to provide 

that taxpayers (including a filer of a 

Form 1099–R) may apply these 

regulations with respect to plan loan 

offset amounts, including qualified plan 

loan offset amounts, treated as 

distributed on or after August 20, 2020, 

which is the date of the publication of 

the QPLO proposed regulations. 

Applicability Date 

These regulations apply to plan loan 

offset amounts, including qualified plan 

loan offset amounts, treated as 

distributed on or after January 1, 2021. 

Thus, for example, the rules in 

§ 1.402(c)–3 will first apply to 2021 

Form 1099–Rs required to be filed and 

furnished in 2022. However, taxpayers 

(including a filer of a Form 1099–R) may 

apply these regulations with respect to 

plan loan offset amounts, including 

qualified plan loan offset amounts, 

treated as distributed on or after August 

20, 2020. 

Statement of Availability for IRS 

Documents 

For copies of recently issued Revenue 

Procedures, Revenue Rulings, Notices, 

and other guidance published in the 

Internal Revenue Bulletin, please visit 

the IRS website at https://www.irs.gov. 

Special Analyses 

These regulations are not subject to 

review under section 6(b) of Executive 

Order 12866 pursuant to the 

Memorandum of Agreement (April 11, 

2018) between the Treasury Department 

and the Office of Management and 

Budget regarding review of tax 

regulations. 

In addition, it is hereby certified that 

these regulations will not have a 

significant economic impact on a 

substantial number of small entities 

pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6). This 

certification is based on the fact that the 

regulations reflect the statutory changes 

to section 402(c) made by section 13613 

of TCJA. The regulations reflect the 

extended rollover period for QPLO 

amounts, as amended by TCJA. 

Specifically, the regulations reflect the 

statute in a manner that (i) is consistent 

with the statutory language, (ii) provides 

certain clarifications, and (iii) eases and 

facilitates plan administration. 

Although the regulations might affect a 

substantial number of individuals, the 

economic impact of the regulations is 

not expected to be significant. The 

regulations do not impose any new 

compliance burdens on taxpayers and 

are not expected to result in any 

economically meaningful changes in 

behavior. 

Pursuant to section 7805(f), the notice 

of proposed rulemaking preceding these 

regulations was submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small business, and 

no comments were received. 

Drafting Information 

The principal authors of these 

regulations are Naomi Lehr and Pamela 

R Kinard of the Office of Associate Chief 

Counsel (Employee Benefits, Exempt 

Organizations, and Employment Taxes), 

although other persons in the IRS and 

the Treasury Department participated in 

their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Adoption of Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

amended as follows: 

PART 1—INCOME TAXES 

■ 1. The authority citation for part 1 

continues to read in part as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ 2. Section 1.402(c)–3 is added to read 

as follows: 

§ 1.402(c)–3 Eligible rollover distributions; 

Qualified plan loan offsets. 

(a)(1) Q–1. What special rollover rules 

apply to a plan loan offset amount 

(including a qualified plan loan offset 

amount)? 

(2) A–1—(i) In general—(A) Eligible 

rollover distribution. A distribution of a 

plan loan offset amount, as defined in 

paragraph (a)(2)(iii)(A) of this section 

(including a qualified plan loan offset 

amount, a type of plan loan offset 

amount defined in paragraph 

(a)(2)(iii)(B) of this section), is an 

eligible rollover distribution if it 

satisfies § 1.402(c)–2, Q&A–3 and 4. 

(B) Other rules relating to plan loan 

offset amounts. See § 1.401(a)(31)–1, 

Q&A–16, for guidance concerning the 

offering of a direct rollover of a plan 

loan offset amount. See also 

§ 31.3405(c)–1, Q&A–11, of this chapter 

for guidance concerning special 

withholding rules with respect to plan 

loan offset amounts. 

(ii) Rollover period for a plan loan 

offset amount—(A) Plan loan offset 

amount that is not a qualified plan loan 

offset amount. A distribution of a plan 

loan offset amount that is an eligible 

rollover distribution and not a qualified 

plan loan offset amount may be rolled 

over by the employee (or spousal 

distributee) to an eligible retirement 

plan (as defined in § 1.402(c)–2, Q&A– 

2) within the 60-day period set forth in 

section 402(c)(3)(A). 

(B) Plan loan offset amount that is a 

qualified plan loan offset amount. A 

distribution of a plan loan offset amount 

that is an eligible rollover distribution 

and that is a qualified plan loan offset 

amount may be rolled over by the 

employee (or spousal distributee) to an 

eligible retirement plan within the 

period set forth in section 402(c)(3)(C), 

which is the individual’s tax filing due 

date (including extensions) for the 

taxable year in which the offset is 

treated as distributed from a qualified 

employer plan. 

(iii) Definitions—(A) Plan loan offset 

amount. For purposes of section 402(c), 

a plan loan offset amount is the amount 

by which, under the plan terms 

governing a plan loan, an employee’s 

accrued benefit is reduced (offset) in 

order to repay the loan (including the 

enforcement of the plan’s security 

interest in an employee’s accrued 

benefit). A distribution of a plan loan 

offset amount can occur in a variety of 

circumstances, for example, when the 

terms governing a plan loan require that, 

in the event of the employee’s 

termination of employment or request 

for a distribution, the loan be repaid 

immediately or treated as in default. A 

distribution of a plan loan offset amount 

also occurs when, under the terms 

governing the plan loan, the loan is 

cancelled, accelerated, or treated as if it 

were in default (for example, when the 

plan treats a loan as in default upon an 

employee’s termination of employment 


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468 Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Rules and Regulations 

or within a specified period thereafter). 

A distribution of a plan loan offset 

amount is an actual distribution, not a 

deemed distribution under section 

72(p). 

(B) Qualified plan loan offset amount. 

For purposes of section 402(c), a 

qualified plan loan offset amount is a 

plan loan offset amount that satisfies the 

following requirements: 

(1) The plan loan offset amount is 

treated as distributed from a qualified 

employer plan to an employee or 

beneficiary solely by reason of the 

termination of the qualified employer 

plan, or the failure to meet the 

repayment terms of the loan because of 

the severance from employment of the 

employee; and 

(2) The plan loan offset amount 

relates to a plan loan that met the 

requirements of section 72(p)(2) 

immediately prior to the termination of 

the qualified employer plan or the 

severance from employment of the 

employee, as applicable. 

(C) Qualified employer plan. For 

purposes of section 402(c) and this 

section, a qualified employer plan is a 

qualified employer plan as defined in 

section 72(p)(4). 

(iv) Special rules for qualified plan 

loan offset amounts—(A) Definition of 

severance from employment. For 

purposes of paragraph (a)(2)(iii)(B)(1) of 

this section, whether an employee has a 

severance from employment with the 

employer that maintains the qualified 

employer plan is determined in the 

same manner as under § 1.401(k)– 

1(d)(2). Thus, an employee has a 

severance from employment when the 

employee ceases to be an employee of 

the employer maintaining the plan. 

(B) Offset because of severance from 

employment. A plan loan offset amount 

is treated as distributed from a qualified 

employer plan to an employee or 

beneficiary solely by reason of the 

failure to meet the repayment terms of 

a plan loan because of severance from 

employment of the employee if the plan 

loan offset: 

(1) Relates to a failure to meet the 

repayment terms of the plan loan; and 

(2) Occurs within the period 

beginning on the date of the employee’s 

severance from employment and ending 

on the first anniversary of that date. 

(v) Examples. The following examples 

illustrate the rules with respect to plan 

loan offset amounts, including qualified 

plan loan offset amounts, in this 

paragraph (a) and in §§ 1.401(a)(31)–1, 

Q&A–16, and 31.3405(c)–1, Q&A–11, of 

this chapter. For purposes of the 

examples in this paragraph (a)(2)(v), 

each reference to a plan refers to a 

qualified employer plan as described in 

section 72(p)(4). 

(A) Example 1. (1) In 2020, Employee 

A has an account balance of $10,000 in 

Plan Y, of which $3,000 is invested in 

a plan loan to Employee A that is 

secured by Employee A’s account 

balance in Plan Y. Employee A has 

made no after-tax employee 

contributions to Plan Y. The plan loan 

meets the requirements of section 

72(p)(2). Plan Y does not provide any 

direct rollover option with respect to 

plan loans. Employee A severs from 

employment on June 15, 2020. After 

severance from employment, Plan Y 

accelerates the plan loan and provides 

Employee A 90 days to repay the 

remaining balance of the plan loan. 

Employee A, who is under the age set 

forth in section 401(a)(9)(C)(i)(II), does 

not repay the loan within the 90 days 

and instead elects a direct rollover of 

Employee A’s entire account balance in 

Plan Y. On September 18, 2020 (within 

the 12-month period beginning on the 

date that Employee A severed from 

employment), Employee A’s 

outstanding loan is offset against the 

account balance. 

(2) In order to satisfy section 

401(a)(31), Plan Y must make a direct 

rollover by paying $7,000 directly to the 

eligible retirement plan chosen by 

Employee A. When Employee A’s 

account balance was offset by the 

amount of the $3,000 unpaid loan 

balance, Employee A received a plan 

loan offset amount (equivalent to 

$3,000) that is an eligible rollover 

distribution. However, under 

§ 1.401(a)(31)–1, Q&A–16, Plan Y 

satisfies section 401(a)(31), even though 

a direct rollover option was not 

provided with respect to the $3,000 plan 

loan offset amount. 

(3) No withholding is required under 

section 3405(c) on account of the 

distribution of the $3,000 plan loan 

offset amount because no cash or other 

property (other than the plan loan offset 

amount) is received by Employee A 

from which to satisfy the withholding. 

(4) The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (a)(2)(iii)(B) of this section. 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset amount to an eligible retirement 

plan within the period that ends on the 

employee’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. 

(B) Example 2. (1) The facts are the 

same as in paragraph (a)(2)(v)(A) of this 

section (Example 1), except that, rather 

than accelerating the plan loan, Plan Y 

permits Employee A to continue making 

loan installment payments after 

severance from employment. Employee 

A continues making loan installment 

payments until January 1, 2021, at 

which time Employee A does not make 

the loan installment payment due on 

January 1, 2021. In accordance with 

§ 1.72(p)–1, Q&A–10, Plan Y allows a 

cure period that continues until the last 

day of the calendar quarter following 

the quarter in which the required 

installment payment was due. Employee 

A does not make a plan loan installment 

payment during the cure period. Plan Y 

offsets the unpaid $3,000 loan balance 

against Employee A’s account balance 

on July 1, 2021 (which is after the 12- 

month period beginning on the date that 

Employee A severed from employment). 

(2) The conclusion is the same as in 

paragraph (a)(2)(v)(A) of this section 

(Example 1), except that the $3,000 plan 

loan offset amount is not a qualified 

plan loan offset amount (because the 

offset did not occur within the 12- 

month period beginning on the date that 

Employee A severed from employment). 

Accordingly, Employee A may roll over 

up to the $3,000 plan loan offset amount 

to an eligible retirement plan within the 

60-day period provided in section 

402(c)(3)(A) (rather than within the 

period that ends on Employee A’s tax 

filing due date (including extensions) 

for the taxable year in which the offset 

occurs). 

(C) Example 3. (1) The facts are the 

same as in paragraph (a)(2)(v)(A) of this 

section (Example 1), except that the 

terms governing the plan loan to 

Employee A provide that, upon 

severance from employment, Employee 

A’s account balance is automatically 

offset by the amount of any unpaid loan 

balance to repay the loan. Employee A 

severs from employment but does not 

request a distribution from Plan Y. 

Nevertheless, pursuant to the terms 

governing the plan loan, Employee A’s 

account balance is automatically offset 

on June 15, 2020, by the amount of the 

$3,000 unpaid loan balance. 

(2) The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (a)(2)(iii)(B) of this section. 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset amount to an eligible retirement 

plan within the period that ends on 

Employee A’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. 

(D) Example 4. (1) The facts are the 

same as in paragraph (a)(2)(v)(A) of this 

section (Example 1), except that 

Employee A elects to receive a cash 

distribution of the account balance that 

remains after the $3,000 plan loan offset 


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Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Rules and Regulations 469 

amount, instead of electing a direct 

rollover of the remaining account 

balance. 

(2) The amount of the distribution 

received by Employee A is $10,000 

($3,000 relating to the plan loan offset 

and $7,000 relating to the cash 

distribution). Because the amount of the 

$3,000 plan loan offset amount 

attributable to the loan is included in 

determining the amount of the eligible 

rollover distribution to which 

withholding applies, withholding in the 

amount of $2,000 (20 percent of 

$10,000) is required under section 

3405(c). The $2,000 is required to be 

withheld from the $7,000 to be 

distributed to Employee A in cash, so 

that Employee A actually receives a 

cash amount of $5,000. 

(3) The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (a)(2)(iii)(B) of this section. 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset to an eligible retirement plan 

within the period that ends on the 

Employee A’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. In 

addition, Employee A may roll over up 

to $7,000 (the portion of the distribution 

that is not related to the offset) within 

the 60-day period provided in section 

402(c)(3). 

(E) Example 5. (1) The facts are the 

same as in paragraph (a)(2)(v)(D) of this 

section (Example 4), except that the 

$7,000 distribution to Employee A after 

the offset consists solely of employer 

securities within the meaning of section 

402(e)(4)(E). 

(2) No withholding is required under 

section 3405(c) because the distribution 

consists solely of the $3,000 plan loan 

offset amount and the $7,000 

distribution of employer securities. This 

is the result because the total amount 

required to be withheld does not exceed 

the sum of the cash and the fair market 

value of other property distributed, 

excluding plan loan offset amounts and 

employer securities. 

(3) Employee A may roll over up to 

the $7,000 of employer securities to an 

eligible retirement plan within the 60- 

day period provided in section 

402(c)(3). The $3,000 plan loan offset 

amount is a qualified plan loan offset 

amount within the meaning of 

paragraph (a)(2)(iii)(B) of this section. 

Accordingly, Employee A may roll over 

up to the $3,000 qualified plan loan 

offset amount to an eligible retirement 

plan within the period that ends on 

Employee A’s tax filing due date 

(including extensions) for the taxable 

year in which the offset occurs. 

(F) Example 6. (1) Employee B, who 

is age 40, has an account balance in Plan 

Z. Plan Z provides for no after-tax 

employee contributions. In 2022, 

Employee B receives a loan from Plan Z, 

the terms of which satisfy section 

72(p)(2), and which is secured by 

elective contributions subject to the 

distribution restrictions in section 

401(k)(2)(B). 

(2) Employee B fails to make an 

installment payment due on April 1, 

2023, or any other monthly payments 

thereafter. In accordance with § 1.72(p)– 

1, Q&A–10, Plan Z allows a cure period 

that continues until the last day of the 

calendar quarter following the quarter in 

which the required installment payment 

was due (September 30, 2023). 

Employee B does not make a plan loan 

installment payment during the cure 

period. On September 30, 2023, 

pursuant to section 72(p)(1), Employee 

B is taxed on a deemed distribution 

equal to the amount of the unpaid loan 

balance. Pursuant to § 1.402(c)–2, Q&A– 

4(d), the deemed distribution is not an 

eligible rollover distribution. 

(3) Because Employee B has not 

severed from employment or 

experienced any other event that 

permits the distribution under section 

401(k)(2)(B) of the elective contributions 

that secure the loan, Plan Z is 

prohibited from executing on the loan. 

Accordingly, Employee B’s account 

balance is not offset by the amount of 

the unpaid loan balance at the time of 

the deemed distribution. Thus, there is 

no distribution of an offset amount that 

is an eligible rollover distribution on 

September 30, 2023. 

(G) Example 7. (1) The facts are the 

same as in in paragraph (a)(2)(v)(F) of 

this section (Example 6), except that 

Employee B has a severance from 

employment on November 1, 2023. On 

that date, Employee B’s unpaid loan 

balance is offset against the account 

balance on distribution. 

(2) The plan loan offset amount is not 

a qualified plan loan offset amount. 

Although the offset occurred within 12 

months after Employee B severed from 

employment, the plan loan does not 

meet the requirement in paragraph 

(a)(2)(iii)(B) of this section (that the plan 

loan meet the requirements of section 

72(p)(2) immediately prior to Employee 

B’s severance from employment). 

Instead, the loan was taxable on 

September 30, 2023 (prior to Employee 

B’s severance from employment on 

November 1, 2023), because of the 

failure to meet the level amortization 

requirement in section 72(p)(2)(C). 

Accordingly, Employee B may roll over 

the plan loan offset amount to an 

eligible retirement plan within the 60- 

day period provided in section 

402(c)(3)(A) (rather than within the 

period that ends on Employee B’s tax 

filing due date (including extensions) 

for the taxable year in which the offset 

occurs). 

(b)(1) Q–2. When are the rules in this 

section applicable to plan loan offset 

amounts, including qualified plan loan 

offset amounts? 

(2) A–2. The rules provided in 

paragraph (a) of this section are 

applicable to plan loan offset amounts, 

including qualified plan loan offset 

amounts, treated as distributed on or 

after January 1, 2021. However, 

taxpayers (including a filer of a Form 

1099–R) may choose to apply the 

regulations in this section with respect 

to plan loan offset amounts, including 

qualified plan loan offset amounts, 

treated as distributed on or after August 

20, 2020. 

Sunita Lough, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 1, 2020. 

David J. Kautter, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2020–27151 Filed 1–5–21; 8:45 am] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 30 

[EPA–HQ–OA–2018–0259; FRL–10019–07– 

ORD] 

RIN 2080–AA14 

Strengthening Transparency in Pivotal 

Science Underlying Significant 

Regulatory Actions and Influential 

Scientific Information 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Final rule. 

SUMMARY: This action establishes how 

the Environmental Protection Agency 

(EPA) will consider the availability of 

dose-response data underlying pivotal 

science used in its significant regulatory 

actions and influential scientific 

information. When promulgating 

significant regulatory actions or 

developing influential scientific 

information for which the conclusions 

are driven by the quantitative 

relationship between the amount of 

dose or exposure to a pollutant, 

contaminant, or substance and an effect, 

the EPA will give greater consideration 

to studies where the underlying doseVerDate Sep<11>2014 16:19 Jan 05, 2021 Jkt 253001 PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 E:\FR\FM\06JAR1.SGM 06JAR1

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