Retirement Plan Loans FAQ

Can I take out a loan from my retirement plan if I work part-time? Yes, part-time employees may qualify for a loan. Payments are typically set up through payroll deduction. If your paycheck is insufficient to cover a payment or you miss one, you will need to make a manual payment directly to ASC Trust.

Why do I need to pay back my loan if I already paid taxes on it? The taxes you paid were only on the withholding and penalty for the deemed amount. The money you originally borrowed still needs to be returned to your account in order for those funds to be available for a future loan.

Can I just write "max" on my loan refinance form instead of a specific number? No. You must specify an exact dollar amount on the refinance form.

Can I continue making loan payments via ACH after I leave my employer? No. Loans are generally due upon separation from employment. If not repaid, the loan will be deemed as a distribution. Exceptions may apply for certain plan types such as 403(b) plans.

How is the 3-month waiting period calculated after paying off a loan? The 3-month waiting period is calculated from the Settle Date (Trade Date) of your loan payoff.

Why is my high balance used when determining my maximum loan amount? IRS regulations require that loans be limited to the lesser of $50,000 or 50% of your vested account balance. If you had a loan balance in the past 12 months, the highest outstanding balance during that period is subtracted from the $50,000 limit. This prevents participants from repeatedly borrowing the maximum by paying down and re-borrowing.

What does "high balance" mean for loans? High balance refers to the largest outstanding loan balance you had during the prior 12-month period. When calculating how much you can borrow, the plan looks at your current loan balance and the highest balance in the last 12 months. The higher of the two reduces how much you can borrow on a new loan.

Can someone else write a check to pay off my loan? Yes. Another person can write a check to pay off your loan. The payment receipt will reference your name as the participant, not the person issuing the check.

Would the interest rate for a home residence loan be the same as a regular loan? Yes, the interest rate is the same. However, the repayment term for a primary residence loan may be extended beyond a regular loan term. Check your plan's loan policy for specific details.

Can I use a primary residence loan to pay off my existing mortgage? No. Primary residence loans can only be used for the purchase or construction of a primary residence, not to pay off an existing mortgage.

Why do the dates on my loan amortization schedule not match the actual dates? The dates on the amortization schedule reflect pay period ending (PPE) dates, not real-time calendar dates. This is why the dates may appear different from the current date.

What happens to my loan if my employer's plan terminates? If your employer's plan terminates and you have an outstanding loan balance, the loan will be deemed as a distribution, the same as any termination process.