Can I Take a Loan From My Pension Plan?

Can I Take a Loan From My Pension Plan?

Generally this won’t be an option that your plan allows, but the IRS has approved it if the employer wants to. Generally speaking, you cannot.

Hypothetically, if allowed in the plan document, and if the pension fund had enough of a surplus to handle such withdrawals, the IRS might find it permissible. The laws concerning such loans are the same for all qualified accounts, such as 401(k)s.

An enrolled actuary would need to help you define when a loan might be allowable in particular deferred benefit plan. A Pension’s main goal is to pay out in retirement for the duration of the obligation, which may be your life and possibly the life of your spouse. Because of the massive liability they shoulder, pensions are inherently rigid and uncompromising when it comes to loans and withdrawals.

Very small employers, however, such as partnerships, may find that including loan or early withdrawal provisions in their plan is possible and advantageous to them. Some companies might allow a loan against your pension, but this is very rare, so don’t count on it.

What Happens if I Withdraw Money From My Pension Plan Before I Retire?
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