If you have a 401(k) loan, you need to follow your repayment schedule. If you do not, your loan may be deemed distributed — meaning the remaining balance is counted as taxable income.
There are 2 situations where you can request a loan suspension without risking a deemed distribution:
Bona fide leave of absence (up to 12 months)
Qualified military service leave (no time limit)
This article covers how each type of suspension works and how to request one.
You may request to suspend your loan payments for up to 12 months if you are on a leave of absence. This applies whether you are unpaid, or being paid less than your loan payments due.
Interest keeps building on your unpaid loan balance
You need to resume payments when you return from leave or when 12 months have passed, whichever comes first
Important: You are not required to make payments during your leave. However, a suspension does not extend your repayment period. You still need to repay the full loan within the original timeframe.
To make up missed payments, you can either:
Make additional payments during the remaining repayment period
Make a lump sum repayment before the end of the repayment period
Any amount still owed at the end of the repayment period will become a deemed distribution.
If you are on qualified military leave, you may request to suspend your loan payments with no time limit. You do not need to resume payments until you return from military service.
Interest keeps building on your unpaid loan balance.
If your loan interest rate is higher than 6%, you can request that 6% apply during the suspension period. This is not automatic — you need to specifically request the reduced rate. Your original rate resumes when the suspension ends.
The time you were on military leave gets added to the end of your original repayment period. This gives you more time to repay.
After you return, your payments cannot be less than they were before your leave. You have a few options for repayment:
Increase your payments to repay the loan by the end of the original repayment period
Re-amortize your payments — spread them out again — over either the original or extended repayment period
Make a lump sum payment to cover missed payments before the end of the original or extended repayment period
Learn more about how military leave affects your 401(k) plan on the Internal Revenue Service (IRS) website.
If you believe you qualify for a loan suspension, contact our Retirement Participant Care team. You will need to provide the following:
Reason for the suspension
Start date of your leave
Estimated date you plan to return to work
Important: When you return from leave, contact our Retirement Participant Care team to restart your repayments on time.