Borrowing Money From A 401k, TSA Or Other Defined Contribution Retirement Plan
What Happens With A Loan If You Leave Your Job
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If you borrow from your plan and then leave your job, your employer can, and usually will, demand full and immediate repayment of the loan.
If you can't repay entire amount outstanding, your loan will be treated as a distribution and you will have to pay taxes on the distribution plus a 10% penalty on the amount borrowed for the year during which the loan is not paid back as demanded. If you can't pay the tax, it will be deducted from your account.
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