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401K loan repayment question

Contributor

401K loan repayment question

I was just notified that HR made an error when it first set up my automatic 401K payment from my paycheck of over $100 a month.  Our finance manager told me the company will immediately begin deducting that amount in order for my loan to remain current.  We've been through an acquisition and a number of changes.  I do not have access to the original loan documents where I am now.  Does anyone have any experience with this?  Thank you. 

Message 1 of 6
5 REPLIES
Moderator

Re: 401K loan repayment question


betterdays2011 wrote:

I was just notified that HR made an error when it first set up my automatic 401K payment from my paycheck of over $100 a month.  Our finance manager told me the company will immediately begin deducting that amount in order for my loan to remain current.  We've been through an acquisition and a number of changes.  I do not have access to the original loan documents where I am now.  Does anyone have any experience with this?  Thank you. 


Wow... that's a heck of a mess up.  Smiley Sad

 

'Back in the day' when I was doing the "corporate thing" I took out 401(k) loans several times, and I had two when I separated from the company.  It's important that your HR gets the payment situation corrected, since if you fail to pay (for whatever reason) it will be treated like a withdrawal by the IRS, including the penalty (if applicable). 

 

It sounds like they are on top of things now so you should be fine.  My own were administered through Fidelity and I was able to check the status of things on their website; if you don't have a similar website available to check you might want to give the administrator of your plan a call to make sure the payments are being received like they are supposed to be. 

 

Keep in mind that even if it's HR's mistake, you are the one who is responsible for 'fixing' it (i.e. the IRS won't care who is at fault), so it's best to stay on top of things like it appears you're already doing.  Smiley Wink

 

Good luck... my fingers are crossed that this will be resolved for you quickly!  Smiley Happy

Message 2 of 6
Regular Contributor

Re: 401K loan repayment question

So true. Luckily I only had to listened to my coworkers complain about it and did not felt the pain. It does not change the fact that irs still blames YOU.
Message 3 of 6
Contributor

Re: 401K loan repayment question

Thanks.  I just hope it is adequately corrected.  This makes me nervous.  

 

Message 4 of 6
Moderator

Re: 401K loan repayment question


betterdays2011 wrote:

Thanks.  I just hope it is adequately corrected.  This makes me nervous.  

 


I feel sure they will work it out, but in any case there's no reason to be nervous.  Smiley Wink

 

Think about it like any other bill; if you are aware of it and know you owe it, you have to see that it gets paid one way or another.  If your HR has problems getting the payment to the plan administrator, you'll need to call them to see if you can make a direct payment.  They also likely have a provision for things such as this (since we all know that 'life happens', even for companies) so it might be no problem at all.

 

The only thing I would be concerned with is if they aren't withholding the payment then they decide to get 'caught up' all at once; in other words, they take multiple payments out of one check.  In this case there's little you can do, but again if you know the money is supposed to be taken out and it isn't, the prudent thing would be to hold that money back yourself so that if/when they do take out more than one payment, you've got it put back already (you can supplement your own 'short' check with the money you've put back, keeping you from running short).  It's really all the same in the end, it's just a matter of how you do your own household accounting.  Some people would notice that a payment wasn't withheld and they would spend the money, only to get upset later when two payments are withheld - that's what you want to prevent.

 

Hang in there... just stay on top of things and this will all work out!  Smiley Wink

Message 5 of 6
Frequent Contributor

Re: 401K loan repayment question

I took out two loans from my 401K. I separated from the company before I paid them off and I was hit with penalties and just recently I received a letter from the IRS stating I owe taxes on that. I made a payment plan and currently paying that off. Make sure it all gets situated but I think it's the payroll department that would deduct the payments. Just make sure it gets taken care of.

Message 6 of 6