1. Tom, age 39, is an employee of Star, Inc., which has a profit sharing plan with a CODA feature. His total account balance is $412,000, $82,000 of which represents employee elective deferrals and earnings on those deferrals. The balance is profit sharing contributions made by the employer and earnings on those contributions. Tom is 100 percent vested. He has no outstanding loan balance. Which of the following statements is/are CORRECT?

1. Tom may take a loan from the plan, but the maximum loan is $50,000 and the normal repayment period will be 5 years.
2. If Tom takes a distribution (plan permitting) to pay health care premiums (no coverage by employer) he will be subject to income tax, but not the 10% penalty.

1. 1 only.
2. 2 only.
3. Both 1 and 2.
4. Neither 1 nor 2.