Why Do I Need my Spouse's Consent for 401(k) Loan

As a spouse has an interest in the accrued benefit of a participant, the plan does not satisfy the survivor annuity requirement unless the plan provides that, at the time the participant's accrued benefit is used as security for a loan, spousal consent to such use is obtained. Consent is required even if the accrued benefit is not the primary security for the loan.

No spousal consent is necessary if, at the time the loan is secured, no consent would be required for a distribution under $5,000. Spousal consent is not required if the total accrued benefit subject to the security is not in excess of the cash-out limit ($5,000) in effect under 1.411(a),11(c)(3)(ii).

The spousal consent must be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be so secured. The consent must be in writing, must acknowledge the effect of the loan and must be witnessed by a plan representative or a notary public.

Participant consent is deemed obtained at the time the participant agrees to use his accrued benefit as security for a loan for purposes of satisfying the requirements for participant consent under sections 401(a)(11), 411(a)(11) and 417.

Change in status.

If spousal consent is obtained or is not required at the time the benefits are used as security, spousal consent is not required at the time of any setoff of the loan against the accrued benefit resulting from a default, even if the participant is married to a different spouse at the time of the setoff. Similarly, in the case of a participant who secured a loan while unmarried, no consent is required at the time of a setoff of the loan against the accrued benefit even if the participant is married at the time of the setoff.

Renegotiation.

For purposes of obtaining any required spousal consent, any renegotiation, renewal, or refinancing that revises a loan shall be treated as a new loan made on the date of the renegotiation, refinancing, renewal, or other revision.


Internal Revenue Code 1.401(a) -20 Q &amp A 24

Fidelity Bonds under The Pension Protection Act of 2006

Fidelity Bonds under the
Pension Protection Act of 2006

Before PPA-2006, each person subject to the bonding
requirement had to be covered by a bond in an
amount equal to at least 10% of the plan assets
handled by such person, with a minimum bond
amount of $1,000, and a maximum of $500,000

PPA-2006 raises the maximum bond amount to
$1,000,000 for a plan that holds employer securities,
regardless of whether a bonded person actually
handles employer securities. Although a technical
explanation states that Congress did not consider a
plan to hold employer securities if it owns them
through a broadly diversified fund, the scope or
effect of this indication is unclear. The technical
explanation refers to mutual funds and index funds.
Since Mutual Funds are not considered to hold Plan Assets,
having employer securities in a Mutual Fund does not incur the
higher bonding. However, Hedge Funds holding Employer Securities
as an option under the plan would be subject to the higher bondng requirement.