Expert: Allen - 1/20/2011

Question
In 1993, my husband a I purchased our 1rst home and I borrowed from my 401k for the dwn pymnt. I left the co, but continued making the agreed payments until the investment co changed hands. I was told I would receive notice thru the mail, I never heard anything until 2009 when a 1099-R was added to my 2007 taxes(yes, after 2007). I don't think it is legal for a finacial inst to sell and sell and finally after 16 years to report it to the IRS.

Answer
I'm not a lawyer and therefgore can not give legal opinions. However, I do work in the retirement plan field and can give you my thoughts on the situation.

Unfortunately, I believe what was done is legal. The investment company had an ethical obligation to advise you. However, there was no legal obligation. It is your responsibility to make payments on the participant loan. And IRS regulations, as absurd as it sounds, call for them to issue a 1099R in January 2009 that indicates that there was a taxable distribution in 2007.

I wish I could give you a better answer.