Every administrator is different.. The one I work for is as follows.. If you are laid off but still considered an active employee, we allow 2 quarters (up to six months) without a payment prior to defaulting the loan... if you are still laid off after this time, it will be considered a distribution and taxes and penalties will apply. If you are back to work you may resume payments and just elongate the schedule of repayment. If your employer sends a term date, the same would still apply if you leave your funds in the account. You would also have the option to close the account, in which case the loan would also be considered money already received, subject to tax and penalty and subtracted from the amount that is left. It is best to check with the administrator of your plan, but if it will be a short term lay off, you should be fine to resume payments once you return. They cannot take payments directly from you, only through payroll... but usually you can pay back in full if you wish.