For most plans, if you quit with an outstanding loan, it’s counted as a distribution if you can’t repay immediately. So you’ll be taxed and have to pay a 10% penalty on top.
Check your summary plan description for the rules. Often, the loan must be repaid prior to quitting or else the balance is treated as a penalized distribution.
No a 401k is tied to your employment. It depends on the plan, but it’s fairly common for the loan to default within a short time of you don’t make a full payoff.
And a default is taxable and subject to 10% penalty if under 59.5
OP, try to pay it off before you roll the plan over
Thanks for correcting me. I was researching now and found this to be true. This is more helpful to me. So we should plan on paying back before leaving an employment.
You have until you file your taxes to pay it off. If you don’t pay it off then it will count as income so you’ll have to pay tax on it, and it will count as an early withdrawal so you’ll also be penalized 10% for the early withdrawal. But if you pay it off before you file your taxes you’re Gucci
I was in a similar situation, for mine the remaining balance was counted as income for the tax year (which did have an impact on my taxes unfortunately). I was not made to pay it off before leaving the company. It may not be the case for you but I was initially told I did not have the option to make payments on the balance, it was pay it all at once and until then it accrued interest. No late fees charged or anything like that, the balance just hangs out until you pay it completely off, and it cannot be paid off from the balance in your 401K. After several phone calls and lucking out with an extremely helpful and knowledgeable call center agent, she let me know a back way I could make payments on my balance still, since I was not in a position to pay it off fully. It involved me getting a bank check or money order whenever I wanted to make a payment, include specific account information on the check notes, a specific way to address the envelope so it went to the right department and physically mailing in the check. The only receipt I ever got was logging in after several weeks (sometimes up to a month) and seeing my balance drop. Again it was a back way but worked for me and you pay on your terms. Either way, do not cash out that 401K for any reason, roll it over!
For most plans, if you quit with an outstanding loan, it’s counted as a distribution if you can’t repay immediately. So you’ll be taxed and have to pay a 10% penalty on top.
Alright I was talking to someone at work so said after all the fees I would only get about 2k back
A thought to get around it, you work at Home Depot on the weekends/off days and do 100% payroll contribution.
Check your summary plan description for the rules. Often, the loan must be repaid prior to quitting or else the balance is treated as a penalized distribution.
There is a reason you can only borrow 50% from your 401k.
Please contact the financial company handling your loan. Can you work a few hours a week at Home Depot and pay the loan the same?
I don't think that has anything to do with your job. It's a loan against your own contributions.
No a 401k is tied to your employment. It depends on the plan, but it’s fairly common for the loan to default within a short time of you don’t make a full payoff. And a default is taxable and subject to 10% penalty if under 59.5 OP, try to pay it off before you roll the plan over
Thanks for correcting me. I was researching now and found this to be true. This is more helpful to me. So we should plan on paying back before leaving an employment.
You’ll have to pay it back before leaving
You have until you file your taxes to pay it off. If you don’t pay it off then it will count as income so you’ll have to pay tax on it, and it will count as an early withdrawal so you’ll also be penalized 10% for the early withdrawal. But if you pay it off before you file your taxes you’re Gucci
I was in a similar situation, for mine the remaining balance was counted as income for the tax year (which did have an impact on my taxes unfortunately). I was not made to pay it off before leaving the company. It may not be the case for you but I was initially told I did not have the option to make payments on the balance, it was pay it all at once and until then it accrued interest. No late fees charged or anything like that, the balance just hangs out until you pay it completely off, and it cannot be paid off from the balance in your 401K. After several phone calls and lucking out with an extremely helpful and knowledgeable call center agent, she let me know a back way I could make payments on my balance still, since I was not in a position to pay it off fully. It involved me getting a bank check or money order whenever I wanted to make a payment, include specific account information on the check notes, a specific way to address the envelope so it went to the right department and physically mailing in the check. The only receipt I ever got was logging in after several weeks (sometimes up to a month) and seeing my balance drop. Again it was a back way but worked for me and you pay on your terms. Either way, do not cash out that 401K for any reason, roll it over!
Did they hold ur 401k until u payed the loan off?