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It's been 60 days since I changed my job and I have an outstanding 401(k) loan of $30K(+30k non loan amount). I have only $20K to pay and my 401k plan won't accept the partial amount.

I still didn't get my delinquency notice, so I don't know when and what are the rules to pay back.

If I don't get any notice, can I argue that I still didn't get the notice, or is it my duty to keep on top of it? When I called the call center they said that generally the loan is due in 90 days. She didn't know if I will get a notice with a grace period or not. What does such a notice generally look like; is there a grace period?

Let's say I get a notice saying that my loan is delinquent. Can I roll my whole 401k(I know i cannot rollover my loan) into my IRA, and pay into the IRA the partial amount to reduce my penalty and taxes? (meaning, 30k non-loan rollover, plus 20k )

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I am surprised that they won't accept a partial amount. – stannius Jan 31 at 20:18
Do you have a Roth IRA? – user102008 Jan 31 at 20:41
Do you have any IRA money right now? – JoeTaxpayer Jan 31 at 21:01
no. no money in IRA. – purpletech Jan 31 at 21:11

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Not getting a notice doesn't reduce or eliminate your contractual liability, you still have to repay the loan. Generally you have to do it within 90 days after leaving your job, that is the grace period.

If you don't repay the loan, it will be considered distribution, and taxable (including the 10% penalty). You cannot roll over a loan to IRA, you have to repay the loan to your 401k before rolling over. Partial roll over will be considered a distribution (including the taxes and the 10% penalty on the part not rolled over).

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what i heard was even though 30k of my loan has gone into delinquency, if i invest my partial amount into IRA i can reduce my penalty amount my that much itseems. – purpletech Jan 31 at 19:40
@purpletech so why not just pay off the loan? I thought you don't have 30K... – littleadv Jan 31 at 19:44
I said I have only 20k ( partial amount ) – purpletech Jan 31 at 20:19
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@littleadv - This may not be allowed. I've not seen an IRA deposit negate the defaulted 401(k) loan. Some research is in order here, I'd say. The company should (but not sure if "must") accept the partial payment. – JoeTaxpayer Jan 31 at 21:00
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Yeah, as I mentioned to @purpletech - better talk to a pro to verify it is an allowed solution. It does make sense to me though, as an indirect rollover. There's no condition on what the distribution form is, only the 60 days period. It might be that the defaulted loan distribution date would be the loan origination day, and that's where it is going to fail... – littleadv Jan 31 at 21:02
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