Did anyone have Allstate withhold severance pay due to an outstanding 401k loan balance?
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Be careful about not repaying 401k loans. You will owe taxes plus possibly an early distribution penalty. It might be necessary but be sure you understand what it will mean for your tax bill so you don’t have any surprises.
Why do some have their withheld and others not????
Mine was withheld too. Had a tiny 401k loan balance left that I completely forgot about and an HSA issue where the eye doctor did not validate the charge. Had to agree to pay both back for severance to get issued. This all took almost 4 months to receive severance.
This depends on exactly what your 401K plan document says, and perhaps on some COVID-19 related laws.
Gut feel is that the company does not have the right to force you to repay the loan from your severance distribution, but perhaps they are trying to "help" their former employees avoid taxes and penalties. If the employee voluntarily agrees to pay the loan out of the severance, then, well that was voluntary, right? But maybe the company fails to mention that re-paying is not required.
Not sure if the company itself has any liability if an employee fails to repay. (Anyone know?)
Someone should get the real 401k plan document and see what it says.
Wonder is it depends on whether the loan is greater than the severance amount?
They did not withhold my 401k loans from my severance, but did send a packet with monthly repayment slips, which I'm not doing. I will just have to default.
Why the inconsistency? Why is deducted for some and not other ?
I had (2) loans for over $40,000. They are still in my 401K account. They will default and be counted as income on next years taxes. I have $15,000 in the account. It will go to taxes as well.
I received my severance (2) weeks after my last day. Loans weren't even discussed
Same here. Had to agree to have deducted before they would issue.
Yes OP I had my severance withheld for the same reason. It was a small 401k loan balance and they withheld my severance. My peers all got theirs and I didn't. I had to call them and negotiate to have it deducted from my severance before they would issue it out. Also I had to agree by signature not to return as an employee to Allstate or their subsidiaries for 12 months as a part of the agreement. Believe me that was easy to sign off on LOL. My severance was a one year severance minus the 401k loan balance deduction.
They shouldn’t hold back anything, if you leave the company those become loans that you now owe as a loan from the company. rather than be automatically deducted from your paycheck, you now have to send in a payment each or pay them off.