401(a) Plan Loans

It’s possible that your 401(a) plan includes a loan option. Find out if your plan provides that option and learn how to borrow money from your 401(a) plan.

401(a) Loan Basics

Not all 401(a) plans allow loans. If a participant’s 401(a) plan does, there’s both a minimum and a maximum amount that can be borrowed. The maximum loan length is five years for conventional loans and up to 30 years for a residential loan used to purchase a primary residence. Other than this difference in loan duration, terms of a primary residence loan are the same as for a conventional loan. The minimum loan amount is $1,000 and the maximum is 50% of their vested balance or up to $50,000 – whichever is less.  

Using Your 401(a) for a Down Payment

One possible use of a 401(a) loan is for a down payment on a primary residence. If someone is using their loan for this reason the loan length may be up to 30 years, as noted above. Other than this difference, the loan works in the same way as a conventional 401(a) loan.

If a 401(a) Loan Is Not Repaid On Time

If you borrow from a 401(a), you’ll pay no early withdrawal penalty for funds distributed as a loan.

However, if you don’t repay the loan on time, according to your loan agreement, you may incur a 10% penalty on the total borrowed unless an exception applies, and you will be responsible for paying taxes on the unpaid balance of the loan.

401(a) Loan Repayments

401(a) loan repayments are made as automatic payroll deductions or via ACH transfer– and the loan repayments are made with after-tax dollars. Your 401(a) loan agreement will detail the loan repayment terms and schedule, which are determined by your plan sponsor and can range from weekly to quarterly.

Make a 401(a) Loan Application

If you want to make a 401(a) loan application and you’re a MissionSquare 401(a) plan participant, log in to your account.