Loans from 403(b)s Whose Employer Sponsors No Longer Exist

Can a 403(b) holder can take a loan from the account if the employer through which the 403(b) was started no longer exists? 

Q. You have a client who has an old 403(b)(7) custodial account through an employer that is no longer in existence. The custodial account/investment provider will allow a former participant to initiate a loan since repayments are made via ACH bank transfers rather than payroll deduction. Would this be permissible in this case since the employer no longer exists? 

A. Since the employer no longer exists, we should look at this scenario as a custodial agreement that is “deemed” distributed under the termination rules. Thus, the contract is now owned by the participant. The provider needs to see if they will still honor a loan—and, remember, since there is only a provider and no employer, the provider is now the entity responsible for authorizing all transactions under the contract. The provider needs to review their custodial agreement to make sure this is an authorized transaction. Otherwise the client can proceed!