60 Day rollover

Submitted by John Vertal on Tue, 2021-04-13 21:45

Can I take a distribution from a 401K, use some of the funds for expenses then use the rest of the funds, within 60 days to pay off an existing 401K plan loan, and shelter, from tax, the amount used to payoff the 401K loan using the 60 day rollover rules.
John



Submitted by Alan - IRA critic on Wed, 2021-04-14 00:22

No, because a 401k loan must be repaid from after tax funds. In addition, the plan would probably not permit a distribution when you have an outstanding loan. 

Submitted by John Vertal on Wed, 2021-04-14 01:07

Thanks, yes actually the client wanted to do this using two diferent 401K accounts, but the use of after tax funds makes sense.

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