Expert: Allen - 4/16/2009

Question
I took out a 9k loan from my 401K, over two years ago and recently noticed that I still owe very close to that amount. After further research, I found that the two deductions from my paycheck are not being sent for repayment of my loan or deposited into my 401k invenstment account.  My loan has been shorted $1800 and my 401k account about $1000. I have brought this to my empolyers attention but they do not really seem to care.  Is there anything I can do? I am afraid if I get an attorney involved I will also lose my job and be out the $2800. Also, can I get in trouble with my taxes since the amount I have claimed on my 401k is not correct?

Answer
I would first write your employer again and whoever administers the plan. If that doesn't work, you can contact the local office of the U.S. Dept. of Labor - Employee Benefits Security Administration. They should be able to help you. Unfortunately, this might entail the risk you mentioned. However, there are laws which may be able to help you if you are terminated.

If the loan went into default because payments are not being transmitted to the plan, it is considered a taxable distribution to you. However, you should be made whole by whoever was responsible for the failure to transmit the money.