Loans are only available if your plan was set up to include them. You can confirm this in your plan documents or your plan’s current settings. Please don’t rely on what an employee sees on their screen alone. If you’re unsure, contact your Betterment service contact.
Yes, it may be possible, but it’s a plan-design decision and may require a formal update to your plan documents (called a plan amendment). Contact your Betterment service contact to talk through what’s involved. We’ll confirm any cost or timing once we’ve reviewed your specific plan.
Your plan documents and current loan settings cover:
• Whether loans are offered and how many an employee can have at once
• Borrowing limits and how long loans last
• Interest rate and any fees
• How often repayments are made
• What happens if an employee leaves or stops paying
If anything is unclear, ask us. General industry rules may not match your plan.
Betterment manages the online loan request, loan records, and account support for your employees. Your team is responsible for:
• Setting up and taking the correct loan repayment from each paycheck
• Sending payroll to Betterment on time, with loan repayments in the correct category
• Letting us know promptly about employment changes, such as terminations and leaves
Depending on your plan’s setup, you may also receive loan approval or new-loan notifications. These are prompts to act. They don’t confirm that payroll is set up.
Employees can usually request a loan online without going through HR:
1. Sign in to Betterment and select their 401(k).
2. Open their withdrawal options.
3. Choose the loan option.
4. Review the loan details and submit the request.
Why can’t an employee see the loan option?
Common reasons include:
• The plan doesn’t offer loans.
• Their account hasn’t received its first contribution yet, or they haven’t finished setting it up.
• They don’t meet the plan’s requirements for borrowing, or their available balance is too low.
• They already have a loan request in progress, or a recent payoff hasn’t finished processing.
• Their account has a hold that needs review.
If they’re signed in to the right account and still can’t see it, they can contact Betterment Support with the plan name and a description of the issue.
The amount shown when they start a request is what’s available. It’s based on your plan’s rules and their vested balance: the part of their account that fully belongs to them. (Employees’ own contributions are always theirs. Employer contributions may become theirs gradually, depending on your plan’s vesting schedule.)
Existing loans, pending requests, and past loan history can also affect the amount. Whether they can have more than one loan depends on your plan, and their account will show whether another loan is available.
Before submitting, employees see the amount available, their interest rate, repayment schedule, payment amount, and how they’ll receive the money. The interest rate is set by your plan, so they should rely on the rate shown.
Timing depends on identity checks, processing, and how they’ve chosen to receive the money. A “pending” request hasn’t been sent yet. If an employee wants to cancel, they should contact us as soon as possible. Whether it can be cancelled depends on how far along the request is.
With a loan, the employee borrows from their own savings and repays it, with interest, into their account. A withdrawal isn’t repaid and is usually taxed. That includes a hardship withdrawal, which is available only for certain urgent financial needs. A loan that’s repaid on schedule generally isn’t taxed.
No. Repayments come out of employees’ paychecks through your payroll system, so your team needs to set up the deduction and include it in each payroll you send us. We can’t collect a payment that was never deducted, but we can check whether a submitted payment was received and applied.
This means a loan has been created or funded for an employee. It doesn’t mean the paycheck deduction is set up yet. Before the first payment is due, add the loan repayment in your payroll system and confirm:
• The employee and loan number
• Payment amount and frequency
• First due date, compared with your pay schedule and payroll cutoff
• The correct loan repayment category with your payroll provider
If the first due date is unclear, contact us before payroll is finalized. A loan can show as active before the first deduction appears.
If a repayment was sent under the wrong category, or for an employee with no active loan, fix your payroll setup before the next payroll run. Then contact us with the employee name, pay date, amount, and payroll provider. We’ll locate the payment and either apply it correctly or return it.
Before your first payroll with the new provider, confirm that each employee’s loan repayment amount, category, frequency, and due date carried over correctly. After that payroll, check that the loan payments were accepted and applied. Provider changes are a common cause of missed or unmatched repayments.
Early payoff is often available. Employees can use the payoff option in their account and follow the payment instructions shown there. They shouldn’t mail a check to a general address or base the amount on an old statement. The payoff amount includes interest up to the day the payment is processed, so it can be slightly higher than the balance shown on a statement.
If an employee wants to raise their regular payments or make an extra one-time payment, check with us first that your plan allows it.
Stop the employee’s loan deduction in payroll. If payroll was already approved and a deduction was taken after the payoff, note the payroll approval time, payoff date, and deduction amount, and contact us. We’ll work out with you whether the payment should be applied or refunded.
The employee’s loan may briefly still show as “In repayment” after a payoff. They shouldn’t send a second payment, and they can contact us to confirm the payoff was received.
Check that the amount and loan number on the employee’s pay stub match what was in your payroll submission, and that the submission was accepted. If everything looks right on your side, contact us with:
• Plan name and employee name
• Loan number, if available
• Pay date and deduction amount
• Payroll provider, submission date, and any confirmation or reference number
Please don’t send sensitive details, such as full Social Security numbers, by email or chat.
Review the employee’s payroll record and deduction setup to find out why the payment wasn’t taken. If your plan allows it, include the missed amount in a future payroll, make sure it’s linked to the correct loan, and reply to the notice explaining what you’ve done. If several payments were missed, list each pay date and amount and contact us before sending a catch-up amount.
Act quickly. Missed payments that aren’t fixed can put the loan into default, which means the unpaid balance may be treated as a withdrawal and taxed. Please don’t tell employees that a missed payment will have no consequences and ask them not to send a separate personal payment unless we’ve told them to.
Contact us with the pay dates, amounts, and any confirmation. Please don’t reverse or resend payments until we’ve reviewed them. An apparent duplicate can turn out to be a display delay.
Report the termination and its effective date through your normal process. Tell us what payments the employee will receive (a final paycheck, severance, or other payments) and check with us how each should be handled for loan repayment. Don’t assume severance should carry the regular loan deduction.
Encourage the employee to contact us promptly. Loans aren’t forgiven when someone leaves. Depending on your plan, the employee may be able to pay off the loan or keep repaying under certain conditions. Otherwise, the unpaid balance may be subtracted from their account. This is called a loan offset, and it’s generally taxed like a withdrawal.
Sometimes, but it isn’t automatic. Report the leave and its dates accurately, and check whether your plan allows repayments to be paused or caught up later. While the employee is out, watch for missed-payment notices and reply with the leave dates and payroll status.
Before the move, list every outstanding loan with the employee, loan number, balance, payment amount, next due date, payroll provider, and employment status. After the move, compare loan balances and the first round of repayments against that list. Let us know about any loans that are missing, duplicated, or unrecognized.
Existing loans move with the account and won’t disappear, restart, or be forgiven. Employees may not be able to request a new loan until their existing loan has fully transferred.
Generally not, as long as it’s repaid according to your plan’s terms. If a loan goes into default or is offset, the unpaid amount may be taxed. The employee may then receive a Form 1099-R, the tax form used to report retirement account withdrawals. Neither your team nor Betterment support can give personal tax advice, so employees with questions should speak with a tax professional.
We can explain how loans work, but neither your team nor Betterment support can tell an employee whether a loan is right for them. Employees may want to consider that the money they borrow isn’t invested while the loan is outstanding. They should also think about whether they can keep up with repayments and what would happen if they changed jobs. A financial professional can help them decide.
If they didn’t request the loan, they should contact Betterment immediately and change their email and Betterment passwords. We’ll review the account for suspicious activity.
If they can’t see their loan details, they should first check that they’re signed in to the right account and plan. If the problem continues, they can contact us with a description of what they see, any error message, and roughly when it happened. Employees should never share a password or full Social Security number in chat.
Use the loan details in your plan administration view to check the status, balance, payment amount, next due date, and any pending payoff or transfer. Please don’t change a loan balance or status manually. If our records don’t match your payroll, contact us with the specific dates and amounts.
Keep payroll registers, deduction details, payroll submission references, missed-payment notices, correction records, employment status dates, and any communication about payoffs or plan transfers, following your plan’s record-keeping policy.