The company you worked for does not actually handle the 401k - they would have a financial company handle it i.e. Fidelity Mutual. Just because your company went out of business does not mean you automatically get your 401k monies back. You need to find out what financial company handles your 401k. Even though your loan payment is no longer being deducted from your pay - you are still bound by the loan repayment contract - and if you do not make the required payment on time they will find you in default, deduct the balance of your loan plus interest and penalties - which can be very high, from your 401k.

Your 401k will remain in place with whom ever the financial service is until which time you request payout - in which case an early payout penalty will be assessed or you roll it over to a new 401k or IRA in which case no penalty would be assessed or you can leave it where it is and it will grow interest in whatever accounts you attached it to.

I know who holds my 401k IPC Limited but I guess I'm wondering why I must pay back a loan that came from MY MONEY. I will be getting a check from the financial company that holds my 401k but will they deduct the loan from my balance that was in the account to satisfy the loan agreement and will I be charged penalties. Keep in mind I have 60days to repay the loan and only 30days has passed.

Yes, you will be charged penalties - these are federal penalties and interest, which IPC has no control over - they are mandated by law. The 60 days to repay means you pay from your pocket, not from your 401k. The 401k is an income that was not taxed in your wages. Anytime it is utilized for other than a retirement program, it becomes taxed and if you remove it from the 401k before your 65th birthday thier is an early withdrawal penalty. That is why rolling over is usually the best option - it stays untaxed. If the repayment of the loan came directly out of your 401k - then the Federal goverment treats this as an early withrawal and they charge a % for that withdrawal.

Thank you and I understand what you are saying. Last question who gets the "extra" money that was repaid from my acct(loan) since I'm not getting it.

Well, the Federal goverment (IRS) gets the biggest portion - again it was wages that were never taxed, so its time for them to be taxed, plus they will receive any penalty for the early withdrawal

If the participant should terminate employment, often any unpaid loan will be distributed to them as income. The amount will then be subject to income tax and may also be subject to 10% withdrawal penalty.

One small correction. You can withdraw from your 401k at age 59.5 without penalty, not 65.

Thank you again you've been really helpful

I get half of my x husbands annuity in a divorce settlement. We were divorced a few years ago. I am in a finanical bind right now and want to borrow money out of it. I just filled out the QDRO papers which we never did. I didn't know about it. When I get the money can I borrow out of it and roll over the rest in another account. Will I get charged a penality and have to claim this as income? I'm 61