403b loan

[Christopher Singley]

The 403(b) plan is a trust; its assets are not your assets.  What you own
is an interest in the trust.  It can be convenient to "look through" the
trust and consolidate your portion of the plan's assets onto your own
balance sheet.

If you're consolidating your portion of the plan's assets onto your own
balance sheet, make sure you consolidate the loan asset too.  I suggest you
set up your chart of accounts so you have a liability account that reflects
your 403(b) loan balance, and an asset account that reflects your 403(b)
account balance.  The 403(b) loan receivable from you would be a subaccount
of the 403(b) asset account.

When you borrow money from the plan, you create a liability toward the plan
- debit personal cash, credit payable to 403(b).  On the plan trust's own
books, it now has an asset that is a loan receivable from you - debit
receivable asset, credit plan cash.  That's how the splits go.

When you make payments on the loan, credit your personal cash, debit your
personal liability toward the plan, debit personal interest expense...
debit plan cash, credit plan loan receivable from you, credit plan interest
income.  That's how those splits go.

Just a suggestion.


On Mon, Feb 10, 2014 at 9:09 PM, Mike or Penny Novack <
stepbystepfarm at mtdata.com> wrote:

> Dennis
>
>
>  But this 'loan' is not a real liability, since it should be
>> considered an asset.  I think?
>>
>>
>>
> That (probably) involves questions that are far beyond the  what we here
> on this list should attempt to answer. I am NOT a tax advisor and  know
> nothing about the rules for a 403b. But if they are anything as complex as
> the rules for 401k loans (I do know the 401k rules)  all sorts of things
> are involved before you can say "not a real loan". Yes these are your
> funds, but how a loan that is never paid back affects your tax liability
> and possible penalties may have dependencies on things like your age when
> you took this loan, etc.
>
> I am going to guess that if below age 59 1/2 (or whatever the age is for
> 403b above which no penalty for an "early distribution") you might want to
> treat this as a real loan. But I repeat, I'm NOT a tax advisor. You should
> consult with one or at least read the small print of the rules very
> carefully.There could even be dependencies related to the purpose of the
> loan.
>
> Michael D Novack
>
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