What is the maximum loan amount permitted under a profit-sharing plan?

The correct answer identifies that under a profit-sharing plan, the maximum loan amount is limited to 50% of the participant's vested account balance, with a cap set at $50,000. This regulation aligns with the Internal Revenue Code (IRC) guidelines for participant loans from qualified plans.

This approach ensures that while participants have access to their funds, there is also an element of protection to prevent over-borrowing against retirement savings. The cap at $50,000 provides a defined limit to ensure that personal loans do not erode the retirement security that the profit-sharing plan is designed to provide. Such guidelines support both liquidity for participants and the overall integrity of the retirement savings landscape.

Understanding these limits is crucial for both plan administrators and participants, as they navigate the responsibilities and benefits associated with profit-sharing plans.