Supplemental 401(k) LoansThe Supplemental 401(k) Plan loan feature allows you to take a loan while continuing to save for your future. When you take a loan from the 401(k) Plan, you borrow money from your own account, pay yourself back with interest, and continue your 401(k) contributions, all at the same time. How does the loan work?When you take a loan from your 401(k) Plan account, you borrow money from yourself. You pay your account back with interest. Am I eligible for a loan?You are eligible for a 401(k) loan if you have a current account balance greater than $2,000 in the 401(k) Plan.Can I continue to save in the 401(k) Plan if I take a loan?If you are an eligible MIT employee, you can continue to contribute to the Plan while you repay your loan. How much can I borrow?Tax laws limit the amount you can borrow from the 401(k) Plan. Generally, you can borrow up to $50,000 or 50% of your 401(k) Plan balance, whichever is less. This limit may be lower if you currently had a 401(k) loan in the last 12 months. The minimum you can borrow is $1,000. You can only take one 401(k) loan at a time. Loans cannot be refinanced or reamortized. What fees will I need to pay?There are no fees associated with taking a loan from the 401(k) Plan, including no application fees and no maintenance fees. What interest rate will I be charged?You will pay the Prime Rate published in The Wall Street Journal as of the first business day of the calendar quarter in which your loan is approved. Your interest rate stays the same throughout the term of your loan. Interest paid on your loan is not tax deductible. How long do I have to pay back my loan?For general purpose loans, you can choose from a 1-, 2-, 3-, 4- or 5-year term. Loans used to buy or build a primary residence may have up to a 15-year term. How do I repay my loan?Your loan repayments are automatically deducted monthly from your checking or savings account. Loan repayments are redeposited into your 401(k) Plan account per your current contribution investment elections. Where does the money for my loan come from?It comes directly out of your 401(k) Plan account. Assets are liquidated proportionally from all eligible 401(k) Plan sources and across all eligible investment funds in which you currently have a balance. What taxes and penalties apply to loans?As long as you repay your loan on time, no taxes or penalties apply. If you do not repay your loan, your loan will be treated as a withdrawal and you will have to pay current income taxes on this money. Additional penalties may apply if you are under age 59 1/2. Furthermore, if you do not repay your loan, you will not be eligible to take another loan from the Plan. How do I apply for a loan?Call Fidelity Investments at (877) MIT-SAVE (648-7283) to initiate a loan request. TTY service for the speech and hearing impaired is available by calling (800) 259-9743. You can model loans by visiting netBenefits. How long will it take to receive my check?It generally takes about three weeks from the time you place your initial request to the time you receive your check. For More Information |
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