I have a loan against my 401 k and am changing job. I can not pay the loan on time before the move. What will happen? Can I pay while working somewhere else with a different 401 k? Suggestions?
2007-02-06 02:45:24 · 3 answers · asked by mnk6 3 in Business & Finance ➔ Personal Finance
Your old job likely won't allow you to pay via check. What you need to do is see if your new job will allow the loan to be rolled over. It's legal and allowable.
You will need to be 100% caught up on your loan per the original amortization schedule by the end of the quarter following the quarter that you missed your first payment. This means if you quit yesterday and you have a payment due today then you have to be 100% caught up by June 30. That gives you some time.
But, the new company does not have to allow it. If they don't then you've run into the bad aspect of 401k loans. It becomes a taxable distribution on June 30. If your new company says that they would like to do it but it's not allowed by law, politely tell them that you've done your research and that it is allowed. Treas. Reg. Sec. 1.401(a)(31)-1, Q&A-16: A plan administrator is permitted to allow a direct rollover of a participant note for a plan loan to a qualified trust described in section 401(a) or a qualified annuity plan described in section 403(a). In 2001 Congress changed the law to allow for the same treatment with 401k's and 403b's.
Again, even though it's allowed by law they do not have to allow it to happen in their plan. So they CAN say no. Loans are pain to administer and they may simply not want to get involved...
2007-02-06 05:37:49 · answer #1 · answered by digdowndeepnseattle 6 · 1⤊ 0⤋
No you would not be able to pay with another company. I would tranfer to an IRA to avoid penalties and have the 401k loan balance substract from my principal balance.
Your company probably is going to do that anyway.
2007-02-06 02:59:01 · answer #2 · answered by Mutt 1 · 0⤊ 0⤋
You will a couple of option.
Pay if off in one lump payment.
Don't pay it. (It will be consider income and you will have to pay taxes and penalties.)
Pay the amount on with a credit card or balance transfer check.
Stay at your current job.
2007-02-06 03:18:20 · answer #3 · answered by evil_twin 2 · 0⤊ 0⤋