Accounting, Payroll & Pension Issues/401k loan payoff

Advertisement


Question
hello Shirley,ok,I have a 401k loan of about 3k being paid back wkly at 64.oo ACH.this retirement company will not let me pay off this loan w/ my vested retirement money(which is way more than the loan).now they do not know this but I am wanting to leave the company I work for but am wanting to pay off my debt before I leave and rollover at a later date w/ a new company.it would take 2 or 3 more yrs at 64.00 wkly to pay off loan.what do you think the reason is that they will not let me payoff loan w/ my retirement money.hope this makes sense.have a blessed day

Answer
I am the administrator for our 401K plan. You are not allowed to use the money in your retirement account to pay off a loan. The loan is against that money but it cannot be used for that reason. There are set reasons the money can be used for in the 401K. Those are the only reasone it can be used and if it is used for anything different the plan could be at risk. The IRS reviews every plan before it is initiated and they have certain regulations for what the money in a 401K can and cannot be used for.

You are allowed to write a personal check and pay off the remaining loan.

Other wise if you change companies and roll the money over than the loan amount will be taken from the account before it is rolled over.

Shirley

Accounting, Payroll & Pension Issues

All Answers


Answers by Expert:


Ask Experts

Volunteer


Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

©2016 About.com. All rights reserved.