A word we don’t see much in daily conversation is “deem.” I imagine a sweeping proclamation made by an authority figure from an ivory tower: “It is deemed that the third day of the standard workweek shall henceforth be called ‘Wacky Wednesday.’” While working “deem” into a sentence among friends can be tough, and you might get some sideways looks, the IRS has no such difficulties.
“Deemed distributions” come to mind. When a retirement plan loan goes bad, a deemed distribution can rear its ugly head.
A participant in a workplace retirement plan cannot take money from the plan willy-nilly. There are rules in place and consequences should one go astray. For example, participants may receive a nontaxable loan of up to 50% of their vested account balance, with a maximum loan amount being the lesser of 50% of the vested account or $50,000. That means if someone has a vested account balance of $120,000, the maximum loan amount is $50,000. On the other hand, if the vested account is only $80,000, the maximum loan limit is $40,000.