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What happens to my 401(k) loan if I leave my employer or my employer cancels the plan?
What happens to my 401(k) loan if I leave my employer or my employer cancels the plan?
Updated over a week ago

If you leave your employer for any reason or your employer decides they no longer want to offer a 401(k) plan, you will need to pay off your remaining loan balance or it will be treated as a taxable distribution.

Here are answers to common questions about loan repayments in these scenarios.

When will the loan be due?

The “termination date” will either be your last day of employment with the company or the date your employer set as the last day the plan is active. You must pay off the loan in full no later than 90 days from the termination date.

What happens if you don’t pay off your loan?

If you do not pay off the loan in full within the 90 day window, the total outstanding balance will be considered a loan offset. With a loan offset, the remaining loan amount is reported on a 1099-R and will be treated as a taxable event. The loan offset balance may also be subject to an early distribution penalty of 10% if you are under the age of 59 ½ (unless you qualify for an exemption).

Taking a full withdrawal (cash distribution) or rollover of your 401(k) account balance before the 90 days have passed will not affect the repayment time, the loan offset will take place at the 90 day mark from the termination date regardless.

If your loan was in good standing as of the termination date, the distribution will be a qualified plan loan offset (QPLO), and you will have until your tax return due date (plus any requested extensions) for the year of the offset to rollover that amount to another qualified retirement plan or IRA. For more information on loan offsets, please see our Tax Notice here.

What happens if my loan was not in good standing before the termination?

If you did not repay your loan according to the terms, you should have received a Form 1099-R with a Code L. This means your unpaid balance was already treated as a distribution (withdrawal) from your 401(k).

Since this will be a loan offset of a previously deemed distributed loan, you will not receive another 1099-R and the amount will not be eligible for rollover.

How to pay off your loan with Guideline

To pay off a loan in good standing, visit the Loans tab within your Guideline account. Click the “Make a payment” button, and you’ll be provided with options and instructions to submit a payment through your bank account or by mailing a check.

Please note that check payments can take up to 14 days to receive and process. Therefore, you’ll want to confirm this timeline fits within the 90 day allowable repayment window, or submit online using your bank account.

See step-by-step instructions on submitting a loan payment here.


This information is for general education purposes only and not intended to be tax advice. You are advised to consult a qualified tax professional before relying on the information provided herein.


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