If every time a company switched 401K providers all loans would be called, there would be a giant uproar.
Imagine the worst case scenario. Somebody takes out a 50K loan that closes on Friday. On Monday they are told they must pay the loan in 30 days because they are switching 401K providers.The employee would be forced to either find 50K or it would be considered distribution and they would owe taxes and penalties.
The employer would now have a bunch of unhappy employees.
If this was the normal way of operating very few employers would be willing to make the switch because it would cost their employees money. It would also eliminate a string that holds some employees to the company. If you still have a year to pay on the loan, you are less likely to be looking for another job.
- there is a misunderstanding regarding the loan situation. The documents could be poorly written, or the briefer may have done a poor job of explaining the situation. Solution: ask for clarification.
- The company made a very poor choice in plan providers. Solution: The cancellation of all outstanding loans seem like such a bad choice you need to ask.
What to ask for: an explanation on how your loan will be handled. Ask if there will be a gap in payments during the blackout period, followed by a double payment. Ask if a separate check needs to be sent during the blackout period. Ask if the final due date is sent.
Call HR, also contact the new benefit provider. Review your loan documents to see if it is addressed. They should cover what happens if you are fired, you quit, you retire, you go on disability. See if they discuss change of benefit companies. IRS regulations cover frequency of payments (at least quarterly) and maximum loan term (5 years unless real estate). Your documents should specify interest rate, minimum payment schedule, and maximum loan term.