401K Loan Language

[tvan]

I have a couple of 6.55% loans on the book.  I'm considering a snowball style (to reduce risk of job loss w/ a 401k loan) pay down using 401k loans. 

My 401k loan interest is 4.25%.  My plan says I can continue contributing but uses the following language:

"You can continue participating in the plan after taking a loan. This means your contributions and the Company match continue to build your account value as you repay the loan."

Does this mean my current pre-tax contribution will continue, and an additional post-tax payment will continue happening?  Or does this simply mean that 7% pre-tax contribution now becomes post-tax? 

[seattlecyclone]

It sounds to me like your contributions won't be affected one bit by the fact you took out a loan, but you really should ask someone at your company who can give you a definitive answer.

[wordnerd]

I agree with seattlecyclone. The language seems to me to be reassuring you that you will continue to get your match, but I would call your benefits people to clarify.

[Brilliantine]

The language sounds like you will be able to continue to contribute pretax while also paying back the loan with posttax money.

This has been my experience too. I was able to contribute pretax money while also paying back the loan. It used to show up on my paystub as separate line items.

On a separate note, even though I left the employer from whose plan I'd taken the loans, Fidelity allows me to do monthly coupon payments towards my loan.

[tvan]

The language sounds like you will be able to continue to contribute pretax while also paying back the loan with posttax money.

This has been my experience too. I was able to contribute pretax money while also paying back the loan. It used to show up on my paystub as separate line items.

On a separate note, even though I left the employer from whose plan I'd taken the loans, Fidelity allows me to do monthly coupon payments towards my loan.

I have principle. I wonder if they allow the same (even though I don't plan on leaving).

I'll send HR an email tomorrow. If it allows pretax contributions plus match I'm going to go ahead and take the loan. The first loan is only 5k which is less than 5% of my total 401k balance.