- Individuals must repay a 401k plan loan over no more than five years, unless the loan goes toward a home purchase, in which case the Internal Revenue Service permits longer repayment periods.
- The money that is repaid goes back into the 401k plan. If repayment is not made, the IRS considers the loan to be a distribution and imposes income taxes and early withdrawal penalties on the unpaid amount.
- When an employee leaves his place of employment, even if his employer fires him, he must repay the outstanding balance of the loan immediately.
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