Q: Does previously defaulting on a 403b loan, disqualify one from a new loan from the same plan (employer) in the future?
I work for a public ISD. I opened a 403(b), took out a loan then defaulted on the loan. I have since paid the loan back plus the interest owed. It has been some years since and now I would like to use to the annuity plan to take out another loan. The Third-Party Administrator (TPA) has three requirements for one to be approved; 1. meet plan requirements- the plan (ISD) defers to the vendor requirements 2. meet vendor requirements- the vendor says if the defaulted loan is paid back with interest, one qualifies for a new loan 3. meet IRS requirements. When I spoke to the TPA representative by phone, I was told I did not qualify because of an IRS tax law that states if I defaulted on a previous loan with the same plan, I can never qualify for another loan as long as I am employed by the plan. When I received my paperwork from the TPA the reason listed for the loan denial was- other, defaulted on loan. There was no mention of the IRS tax law.
A: Regardless of what anyone else told you, if the IRS told you no, the answer is no.
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