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401(k) Loan Processing & Repayment Guide for Plan Sponsors

Published

This outlines how Plan Sponsors can process 401(k) loans and manage repayments. For plan-specific rules, refer to your loan procedures document and consult your recordkeeper or third-party administrator.

Participant Loan Requests

Participants can request a 401(k) loan by logging into their account and following these steps:

  1. Navigate to: Transfer or Rollover > Withdraw > Your 401(k) Account > View Withdrawal Options
  2. If eligible, the loan option will be visible.
  3. The participant must link a personal bank account before requesting a loan. This is done via: Settings > Funding Accounts

Loan requests are subject to employer approval and plan-level rules. Once approved, the funds will be deposited into the participant’s linked bank account.

Loan Repayment Processing

Loan repayments must be deducted from participant pay. The process varies depending on whether your plan has payroll integration.

If the plan has payroll integration:

  • Confirm with your payroll provider that loan repayments are enabled and properly configured.
  • Loan amounts will be automatically calculated and withheld from participant pay.
  • Ensure coordination between your payroll provider and Betterment to prevent errors or missed payments.

If the plan does not have payroll integration:

You will need to manually add the repayment details to your payroll file. To find the required information:

  1. Log in to the employer dashboard at Betterment.com/401k
  2. Select Employees on the left-hand side
  3. Search for and click on the employee’s name
  4. On the employee’s profile, move your cursor to the right and click on the 401(k) Loans tab
    From this view, you can locate:
  • The employee’s loan identifier (this is their designated loan name)
  • The repayment amount

 Add these details to your payroll file before submission. Learn how to upload payroll here.

Important Reminders

  • Loan repayments must be withheld from each pay period and remitted promptly to the plan via payroll.
  • The standard Betterment loan processing fee is $75.
  • Participants can repay their loan in full at any time via: Settings > Loans
  • If a participant terminates employment with an outstanding loan balance, the unpaid portion may be classified as a taxable distribution and reported on Form 1099-R under Documents > Taxes in the participant’s account.

Need Help?

For assistance with loan setup, repayment processing, or payroll file preparation, refer to your loan procedures document or contact your Betterment for Business representative.