November 2, 2014

Do You Have to Repay a 401k Loan Immediately If You Lose Your Job or Quit?

One of the commonly cited problems with 401k loans is that if you end your job at the company then you'll have to pay back the loan in full.    That could be a real big problem if you're laid off unexpectedly and then presented with a bill to pay off a sizable loan at the same time.  

But is this rule mandatory?   Well no.  Its not really a rule in general. 

My employer does NOT require us to repay 401k loans after ending your job.  

There isn't anything that I can find in the 401k laws or rules that actually says this is a rule.  So its just up to the employer policies.     I am guessing that most employers do require 401k loans to be repaid when the job ends.   I say that given how almost everyone states this policy as if its a general rule.  However I don't have any information on how prevalent this rule is so I am just saying that based on assumption.  

To know if 401k loans from your plan are required to be paid in full when the employment ends the only way to know is to check with the 401k plan administrator or documentation.


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