401K Loan Default

[jwmc1]

OK...so in an atempt to keep paying my creditors, I decided to default on my 401K loan and as a result I can't contribute to it. Is there any point when I can again? I have already been hit with the taxes (one of the reasons I need to file). This was incredibly stupid, but it is what I did. Will I ever be able to contribute again?

[daytona]

I don't see why you wouldn't be able to contribute again. You were hit with taxes because you did not pay back the loan and you received the money. IE, a distribution. If you cashed in your 401k instead of going the "loan" route (you pay yourself/401k back) then you would have received the same thing a distribution with taxes due. Has nothing to do with future contributions...

[justbroke]

OK...so in an atempt to keep paying my creditors, I decided to default on my 401K loan and as a result I can't contribute to it. Is there any point when I can again? I have already been hit with the taxes (one of the reasons I need to file). This was incredibly stupid, but it is what I did. Will I ever be able to contribute again?

I don't think there's any Statutory restriction, that I can tell, which would prevent you from continuing to contribute to a 401(k) after you have defaulted on loans. The only thing you're prevented from is taking any more loans until the default is corrected. (You could even still take hardship loans, but that's as bad as defaulting!)

IN any event, you would have to contact your Plan administrator for specifics on contributions and loan defaults.

[jwmc1]

Called our HR department, they told me that I can never contribute to the 401k again. That is just great...I can't believe what a dumb a$$ I am

[NoMoreCards]

Many plans spell this out in the paperwork. Although you checked with HR, I recommend reading your plan documents. It is possible the person you asked wasn't sure and gave you a incorrect answer.

At my place of employment, if you default you can not contribute for 1 year. Although each plan is different, it seems a bit much to say "never".

Just double check. It can't hurt.

All the best.

[justbroke]

My employer is the same. If you default, you cannot contribute for one year. If you pay the loans back, you cannot have another loan until a year passes from the date you paid off the loans.

[lrprn]

There's more than one retirement plan out there. If yours is so foolish as to penalize you permanently for not paying a loan back that you took from your own money for a low interest rate (and you took the tax hit on top of that), then move on. Join another retirement plan and deposit into it yourself every month. Good riddance.

I do agree with others that I wouldn't take the word of one person in your HR dept who may not be familiar enough with your plan to give you a reliable answer. Contact your HR dept's benefits specialist or call the retirement plan offices yourself.