Repayment of 401K Loans

While we are on the 401k topic... I am in Austin and I was let go today. Do you know what will happen to our 401K loans (for those of us that have them). I took one that I used for a house downpayment and I have about $20K left to repay into the 401k fund. I do not think I’ll have money to repay this quickly and I am not even sure if they will allow me to repay it. Do you know how 401K loans work when you separate from the company and what options will be offered to me.

I think I can find money for repaying the loan in a couple of months but will not be able to have it before the end of February. Any suggestions are welcome.

Comment! It's anonymous!

7 replies (most recent on top)

do not worry. You will get options to repay it. It will be monthly payments from your account once the payroll at GM ends. If you cannot pay it will be treated as withdrawal and penalty will be added when u file taxes for 2019.

During the severance period the handbook says they will continue to take payments out

I've dealt with this before. It's not that scary and it's actually rather straightforward. You call your 401k company and set up for the payments to come out of your checking account directly instead of from your paycheck. You can continue this with your new job so long as you don't roll your old 401k into your new one and just keep it separate. I used to work for Chrysler and had a 401k loan when I quit and I still pay it monthly from my checking with my GM paycheck. Now, if you can't make the payments after the 60 day grace period then it becomes a separate issue. But no immediate payment is required or anything like that.

@amr is correct, if you cannot repay it'll be shown as your income in 2019 (not 2018). You'll also pay a 10% early withdrawal penalty.

I am not 100% sure but I think you'll get a 60 day grace period to repay, Fidelity will mail you the forms, I've done it before and it's doable, it's more than 30 days but I am not sure if it's 60, 90 or 180, something like this. HR should be able to answer this question - they are slammed right now but an email to someone in HR should do it. If you are separated you may want to ask someone you know and who's at GM to call the HR it'll probably be quicker.

I'd repay the loan, it saves you that 10% penalty and you'll force yourself to save. So, if you can definitely keep 401k as full as possible.

you have 60 days to pay it back before it is considered as early withdrawn

When you took out the loan the money was deducted from your 401k balance. If you can't pay it back, you will have to claim the remaining $20k as income on your 2018 taxes.

Thread regarding General Motors layoffs

Repayment of 401K Loans

7 replies (most recent on top)

Post a reply