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Ask Bob: CARES Act Relaxes Certain 401(k) Plan Loan Rules

Plan loan repayments for qualified individuals normally due between March 27, 2020 and December 31, 2020 can be suspended for one year.


I've been informed I'm getting furloughed for one to two weeks and my salary is being reduced. I have an existing 401(k) loan that I make payments on twice a month that will be paid off in July 2021.

My question is, under the CARES act, can I stop making those payments for up to a year? I've read conflicting information on this. Some sites say the loan must either be new or have the balance due before the end of the year. Can you clarify this? I obviously would like to not have to pay $520 a month while I'm furloughed.


There are uncertainties under the CARES Act about how loan suspensions work, notes David Goldfarb, CLU, and president and CEO of Estate & Pension Plans. “However,” he adds, “this loan can be suspended at least until January of 2021.”

Another interpretation is it can be suspended until one year from the suspension date. “To be safe, plan on January 2021,” he says.

The due date for the last payment of the loan will be extended for the amount of time it is suspended, Goldfarb explains, so, if it is suspended for eight months, the end date will be moved from July 2021 to March 2022. Interest will continue to be added and accrue. The loan will have to be refinanced next year.

“The payments are likely to be a little higher because of the added interest,” he says. If it can be suspended for one year, the end date (when the loan is completely paid) will be July, 2022.

Got questions? Get answers!

Got questions about the tax law, Social Security, Medicare, retirement, investments, or money in general? Email Kim McSheridan assisted with this report.