How can a participant get money out of the qualified plan while still employed by the plan sponsor?
Any participant, except an owner-employee in an unincorporated business or a shareholder-employee in an S corporation, may borrow against the vested portion of their benefits, up to the statutory limits. This is a very useful privilege since the participant can use the monies and still receive tax benefits of a qualified plan. In profit sharing plans, distributions are permitted in the event of certain financial hardships such as accidents or health problems. Distributed amounts are generally taxed as ordinary income.
