What happens if I have a 401(k) loan but later lose or quit my job?
If you leave the company (whether voluntarily or not) and have a loan against your 401(k), there are some new rules you should be aware of.
The 2018 Tax Reform law extended the repayment period for your 401(k) loan until the due date of your tax return, including extensions.
If you don't repay the loan, its balance (less any nondeductible contributions) is a taxable distribution that’s reported on a 1099-R. If you’re under age 59 1/2, you'll pay a 10% penalty for an early distribution.
A plan may provide that if a loan isn't repaid, your account balance can be reduced or offset by the unpaid portion of the loan. However, you can roll over the offset amount to an eligible retirement plan. You have until the due date of your tax return, including extensions, to roll over the offset amount.
When you enter your 1099-R, we'll calculate any additional taxes or penalties on your outstanding 401(k) loan balance.
