401(a) Plan Loans

Summary

Your 401(a) plan may offer a loan feature — giving you access to funds when you need them. Find out if your plan provides that option and learn how to borrow money from your 401(a) plan responsibly.

401(a) Loan Basics

Not all  401(a) plans allow loans. If your 401(a) plan offers loans, 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 your 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 you are using a 401(a) 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) plan, you won’t pay an early withdrawal penalty on the loan amount. However, if you fail to repay the loan on time, according to your loan agreement, the outstanding balance may be treated as a taxable distribution. In that case, you could owe income taxes and a 10% early withdrawal penalty —unless an exception applies.

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.

Apply for a 401(a) Loan

Log in to your account to apply for a loan from your MissionSquare 401(a) plan.