SUBMIT A COMPLAINT

401K / 401K IRS rules on 401K unfair and nonsense

1 Garden Grove, CA, United States Review updated:
Contact information:

Under the IRS policy a borrower who pays off $49000 loan from 401K cannot borrow back within 12 months, even cannot borrow back a lesser a mount of $5, 000 in next month. This rule does not make sense and is absolutely unfair that cause our society unrest. It is too complex, goes beyond normal mind, and discourages people to pay off their loan. I believe many people suffered by this trap. I want to file a complaint on this policy and alert to other citizen. My complaint is based on the answer from my 401K adminitrator: "Thank you for contacting ING Institutional Plan Services, LLC. The maximum loan amount is the lesser of the following: * $50, 000 reduced by your highest outstanding loan balance from all sponsored plans (including defaulted loans) in the past 12 months over the current outstanding loan balance (including defaulted loans) * 50% of your total vested account balance less the current outstanding loan balance including defaulted loans The loans that you have paid off in the past 12 months will affect your loan availability. The IRS only permits you to borrow $50, 000 in a 12 month period. If you have had loans in the past 12 months, it will affect your loan availability, even if those loans are paid off. The Plan will verify all of your loan's highest outstanding loan balances in the past 12 months (even if the loans are paid off) to calculate the amount that you have available to borrow. .. "

Li
Mar 26, 2013
Sort by: UpDate | Rating

Comments

  • Co
      Mar 26, 2013

    A 401k is a retirement fund. It was never meant to be money you can borrow from.

    "I want to file a complaint on this policy and alert to other citizen"
    It isn't a policy, it's the law set by congress. If you want to complain contact your congressman. Having a 401k is voluntary, if you don't like the rules don't participate

    +1 Votes
  • Li
      Mar 27, 2013

    It is ok not for employee to borrow their saving & their money. Even though they do not withdraw, they just borrow with their savings secure. But a misleading info can make employees pays off $49000 and cannot borrow just $5000 for their critical need and unexpected situation is another story.

    Moreover, there is a website says: "...There are times, however, when you need cash and there are no viable options other than to tap your nest egg. For this reason, the government allows plan administrators to offer 401k loans to participants (be aware that the government doesn’t require this and therefore it is not always available.) ..." (http://beginnersinvest.about.com/od/401k/a/aa122104a_3.htm)

    Does IRS policy or the company cause such unfair practice.

    Here is the answer from DOL:

    From: OFCCP [mailto:[protected]@dolncc.dol.gov]
    Sent: Wednesday, March 27, 2013 7:45 AM
    Subject: 401K/TAX - DOL185

    Thank you for contacting the U.S. Department of Labor National Contact Center.

    Pertaining to 401K, the Wage and Hour Division determines prevailing wage rates and fringe benefits for federal contractors.

    The office to best answer your question is the Orange CA - WHD - Area Office. You may contact this office at (714) 621-1650. When calling listen carefully to all of the options in order to make the appropriate selection and make note of the dates and times you attempted to call the office. If you are unable to reach a representative or have not received a return call within 2 business days, please contact us in order to forward your information to your local office. Please be advised that you may be put in a hold queue status until a WHD representative can take your call if you decide to contact this office. Please visit the WHD website at www.wagehour.dol.gov for additional information.

    Concerning taxes, the Internal Revenue Service (IRS) is a bureau of the Department of the Treasury which enforces federal internal revenue laws and assists American taxpayers with meeting their tax responsibilities. Additionally, state and local government entities have their own tax laws and enforcement services.

    Generally speaking, the US Department of Labor does not directly address tax related inquiries nor does it have jurisdiction over the services provided by the IRS, state, or local government tax and revenue entities.

    The office to best answer your question is the Internal Revenue Service. You may contact this office at (800) 829-1040. Please visit the website at www.irs.gov for additional information.

    For further assistance, please visit the following website, www.dol.gov/whd/contacts/state_of.htm, to locate your state local office.

    With regards to the OFCCP mailing list, the Office of Federal Contract Compliance Programs (OFCCP) enforces affirmative action and equal employment opportunity required of those doing business with the Federal Government.

    Customers who subscribe to the OFCCP mailing list benefit by receiving outreach materials such as brochures and fact sheets, as well as notices about webinars, new OFCCP Web site postings, and information about significant initiatives, events, and agency activities. Subscribers will receive OFCCP materials via e-mail as information on events become available. In some instances these materials will be distributed by mail.

    Thank you for your interest in being added to the Office of Federal Contract Compliance Programs (OFCCP) mailing list. You have been successfully added to the OFCCP mailing list.

    If you need any additional information about our services please feel free to contact us via telephone at 1-800-397-6251. You may also visit the Office of Federal Contract Compliance Programs (OFCCP) website at www.dol.gov/ofccp.

    Thank you,

    The U.S. Department of Labor National Contact Center

    We would like to hear from you! Please click or copy and paste the following link into your browser to provide feedback on your email experience:

    https://www.surveymonkey.com/s/DOLNCC_OFCCP

    The contents of this message are provided as a public service to enhance public access to general information on Department of Labor programs. The accuracy and timeliness of information is under regular development and review. While we try to maintain the reliability of the general information we present publicly, you should be mindful that you remain responsible for actions you take on the basis of this information. We will make every effort to correct errors brought to our attention.

    [THREAD ID:1-1P2ZIU]

    -1 Votes
  • Li
      Mar 27, 2013

    It is ok not for employee to borrow from their savings & their money. However, misleading info is another story for a normal mind. In some situation, people will accept penalty to withdraw their money for their critical situtation.

    Moreover, there is a website says: "...There are times, however, when you need cash and there are no viable options other than to tap your nest egg. For this reason, the government allows plan administrators to offer 401k loans to participants (be aware that the government doesn’t require this and therefore it is not always available.) ..." (http://beginnersinvest.about.com/od/401k/a/aa122104a_3.htm)

    Does IRS policy or the company cause such unfair practice.

    -1 Votes
  • Li
      Mar 27, 2013

    answer from DOL:
    http://www.topix.com/forum/personal-finance/401k/T8M9NT0PVF37B309Q

    -1 Votes
  • Li
      Mar 27, 2013

    I filed complaint to Senator, IRS, Congress, DoL ... and put on my blog. Sometime a law / rules should be reviewed due to its obsolete ...

    -1 Votes
  • Li
      Mar 27, 2013

    Please do not misunderstand my complaint/alert.

    The problem is not about whether to allow/should borrowing from 401K or not. The problem is about "Allowing to borrow from 401K", "Allowing to pay off, " but "Do not allow to borrow back without a clear notice/easy understand."

    I would like to alert to a major normal people, not financial professional.

    The Info about borrowing a 401K loan should add a statement when the borrower pay off their 401K loan: "The borrower may not allow to borrow back after paying off the loan..."

    -1 Votes
  • Li
      Mar 27, 2013

    *** Fallacy: Personal Attack

    Also Known as: Ad Hominem Abusive.
    A personal attack is committed when a person substitutes abusive remarks for evidence when attacking another person's claim or claims. This line of "reasoning" is fallacious because the attack is directed at the person making the claim and not the claim itself. The truth value of a claim is independent of the person making the claim. After all, no matter how repugnant an individual might be, he or she can still make true claims.

    -1 Votes
  • Li
      Mar 27, 2013

    "PLEASE stop trying to communicate with the rest of the world." That 's why the rest of world hate American because just one person comment like this.

    0 Votes

Post your comment