1. Pete Moss, age 42, is an employee of a company which has a profit sharing with a CODA feature. Petes total account balance is $360,000, $75,000 of which represents his elective deferrals and earnings on those deferrals. The balance is profit sharing contributions made by his employer and earnings on those contributions. Pete is 100% vested. Which of the following statements is/are correct?

1. Pete may take a loan from the plan, but the maximum loan is $37,500 and the normal repayment period will be 5 years.

2. If Pete takes a distribution to pay healthcare premiums, he will be subject to income tax but not the 10% penalty.

A) 1 only B) 2 only C) Both 1 and 2 D) Neither 1 nor 2