Avoid a 401(k) Loan Default & Its Tax Consequences
September 18, 2020
MEC Benefits Committee
For those of us who have been on a longer-term Special Company Offered Leave of Absence (COLA) for some time and who also have an outstanding 401(k) loan, we want to ensure you are aware of some very important information to avoid the tax consequences of a 401(k)-loan default.
Please keep in mind, while on a Special COLA, you are considered to be an active United employee, and as a result, 401(k) loan repayments must be made. Given the realities of the COVID-19 pandemic, you have two (2) choices: a loan deferment or to continue making the loan payments.
Legislation was recently passed by Congress to help ease some of the financial impacts of the COVID-19 crisis. This includes the option to defer your loan repayments through December 31, 2020. To avoid a 401(k) loan default and becoming taxable income, you may want to consider loan deferment.
To request a deferment for loan payments, log on to netbenefits.com. Once on the site, from the “Quick Links” drop-down menu, select Loans or Withdrawals. After January 1, 2021, your 401(k) loan will be re-amortized, and you will be notified of your new loan repayment.
If you would like to continue making 401(k) loan repayments directly to Fidelity, set up electronic funds transfer (EFT) by logging on to netbenefits.com. Once on the site, from the “Quick Links” drop-down menu, select Bank/Tax information.
If you have any questions, call the Fidelity Service Center for United Employees at 800-245-9034. Representatives are available from 7:30 a.m. to 11 p.m. Central time, Monday through Friday.
During this pandemic, additional financial resources are available at the United COVID-19 Financial Wellness website.