Is there some kind of penalty payment when you get displaced and they back out what you owe on your 401K loan? Or is there a waiver to that because you were displaced? If you leave for another job is it the same deal or no? I know I’m going to get some trolls on here.
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I always read thru my loan docs before signing then refer to them when I have questions. In general, getting a loan from your ex wife is easier and safer in the long run then from your 401k whether you plan on getting laid off or not.
I called empower about this same scenario. After your 60-day non working, Empower will be informed of your termination status. Then On the Loan screen of the Empower site, there will be an option to pay off or extend the current payment schedule of the original terms. You will also be able to choose manual or auto ACH payments.
If you aren't able to pay it back, you will be issued a 1099-R for the outstanding amount and it will be considered an early withdrawal you will owe full taxes on.
nothing better than paying back a loan on a tax deferred account with after tax dollars. you get to pay taxes on it twice.
I had a loan when I was displaced. 8 months to go. It WAS NOTcalled due immediately. Empower, the manager of the 401k at the time, set up a re-payment plan that matched what I was having deducted from my paycheck. So, the loan was paid off by the original due date. And before severance ended.
While the other posters are correct in that it is due immediately, you may also be able to qualify for a hardship withdrawal. This can be up to $10k or 50% of 401k balance (whichever is less),without the 10% tax penalty.
You will be required to show proof, but being laid off and having to pay the loan off might qualify.
Agree with the other posters. I have one more payment left and asked HR 401k and they confirmed if displaced or leave it becomes due immediately. However you have the option to set up monthly payments through empower directly until it’s paid back in full. Otherwise you’re subject to fees and penalties depending on your status. Definitely worth a call to check on it.
Once employment ends, the loan balance is called I believe.
remainder of loan becomes due immediately.