If you have a 401k loan out and the bank sends you along your way, will you then be subjected to the early withdrawal penalties? I wonder if you can still make the payments to keep from being penalized? Appreciate the answers.
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happened to me
they give you an option to pay it off in full. so, you'll need to send a single check.
if you do not do that, you'll get a 1099 form indicating that you've withdrew money
it'll be taxable next year, you'll pay 10% penalty
Should you have a loan drawn against your 401k and are displaced you can do one of two things. You will receive a coupon book from Merrill Lynch so you can continue to remit your payments or you can allow the loans to go into default, you will then receive a 1099 statement which you will need to report as income on your tax return and pay the required taxes and penalties. Should you allow the loans to go into default it will not impact you negatively.
As per the comment above, they CANNOT waive early withdrawal fees, those fees are mandate by the Feds its nothing to do with bank or being an employee. you can continue to make repayments on your own.
Thanks!
That is correct. The automatic withdrawal from your paycheck stops and it becomes your responsibility to make the payments on the loan.
Your 401k is still yours when they let you go. If you have a loan out, I assume that you will still be responsible for paying that loan. If they waived the early withdrawal because you were an associate, the loan is already done and I would think you wouldn't get penalized after the fact.