Can I Take a Loan From My John Hancock 401(k)?

Yes, you can take a loan from your John Hancock 401(k) if your employer’s plan document includes the loan feature. Federal law caps the amount at the lesser of $50,000 or 50% of your vested balance, and the standard repayment term is five years through payroll deductions. Whether you qualify, how much you can borrow, and the exact terms all come down to a mix of IRS rules and the specific plan your employer has set up with John Hancock.

Whether Your Plan Allows Loans

A 401(k) plan is permitted, but not required, to offer loans.¹ Your employer made that choice when the plan was designed. The fastest way to confirm is to log in at myplan.johnhancock.com and look for a loan option, or read the Summary Plan Description your employer provides.

If loans are available, you generally need to be an active employee currently participating in the plan. Former employees and retirees with a remaining balance usually cannot initiate new loans. You also need enough vested money to borrow against. Many plans set a minimum loan amount around $1,000 and limit you to one or two outstanding loans at a time. If you already have a loan at the plan’s limit, you have to pay it off before starting another.¹

How Much You Can Borrow

Under 26 U.S.C. § 72(p), the maximum is the lesser of:²

$50,000, reduced by prior loan activity in the past 12 months, or
The greater of 50% of your vested account balance or $10,000.

The $10,000 floor helps participants with smaller balances. If you have $16,000 vested, half would be $8,000, but the floor lets you borrow up to $10,000 as long as your account can secure it.²

The 12-Month Lookback

The $50,000 cap is not a flat figure. It gets reduced by the difference between the highest outstanding loan balance you carried in the previous 12 months and what you owe on the date of the new loan.³ If you recently paid down a large loan, your available borrowing room may be smaller than you expect.

Repayment, Interest, and the Tax Catch

The standard repayment term is five years, with payments due at least quarterly.⁴ Most plans pull payments automatically from your paycheck. If you use the money to buy your main home, federal law allows a longer term without setting a specific maximum; your plan document sets the actual limit, often 10 to 15 years.⁵

Department of Labor rules require the interest rate to be “reasonable.”¹ Most plans use the prime rate plus 1%. All of that interest goes back into your own 401(k), so you are paying yourself, which offsets some of the market growth you miss while the money is out.

Watch the tax mechanics on a traditional pre-tax 401(k). Your original contributions went in before taxes, but your repayments come out of take-home pay that has already been taxed. When you eventually withdraw the money in retirement, the entire balance is taxed again as ordinary income. The interest portion effectively gets taxed twice.

How to Request the Loan Through John Hancock

Sign in to the participant portal at myplan.johnhancock.com and open the loan request section. It will show your current vested balance and the maximum you can borrow. Before you start the application, have this ready:

The specific dollar amount you want, within the limits above.
The purpose of the loan (general use or primary residence), since that changes your repayment term.
Your preferred repayment frequency, which usually matches your payroll schedule.
Your bank routing and account numbers if you want electronic deposit.

The portal walks you through a review screen where you confirm the terms and electronically sign a promissory note. Depending on the plan, the request may then route to your employer’s plan administrator for approval.

Timing and Fees

After approval, John Hancock sells enough of your investments to fund the loan. Trade settlement usually takes one or two business days, and an electronic transfer typically reaches your bank in three to five business days. Paper checks can take up to ten business days.

Expect an origination fee and an ongoing annual maintenance fee, both usually in the range of $50 to $75 and both deducted from your 401(k) balance rather than the loan proceeds.⁶ Your plan’s fee disclosure lists the exact amounts.

One boundary worth flagging: some qualified retirement plans require written spousal consent for loans over $5,000, but most 401(k) plans structured as profit-sharing plans are exempt.⁴ Check your Summary Plan Description if you are unsure.

What Happens If You Leave Your Job

Separation from your employer creates an immediate problem if you still owe on the loan. Most plans require repayment shortly after you leave, often within 60 to 90 days. If you cannot pay the remaining balance, the plan reduces your account by that amount. This is called a plan loan offset, and it counts as a taxable distribution.

There is a way to soften the tax hit. If the offset happens because you left your job or the plan terminated, you can roll the offset amount into an IRA or another eligible retirement plan by the due date, including extensions, for filing your federal income tax return for that year.⁵ For most people who file an extension, that means October 15 of the following year.⁷ A completed rollover avoids both income tax and the early distribution penalty on the offset amount.

What Defaulting Costs

If you stop making payments while still employed, the unpaid balance is treated as a “deemed distribution.” The plan administrator reports it to the IRS on Form 1099-R, and the amount becomes taxable income for that year.⁴ Unlike an offset at separation, a deemed distribution cannot be rolled over.

If you are younger than 59½ when the deemed distribution hits, you also owe an additional 10% early distribution tax on the taxable amount.² Between regular income tax, the penalty, and the retirement savings you lose, defaulting is the most expensive way this loan can end. Staying current on payroll deductions is the simplest way to keep it from happening.

1
U.S. Department of Labor. FAQs About Retirement Plans and ERISA
2
Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
3
Internal Revenue Service. Issue Snapshot – Borrowing Limits for Participants With Multiple Plan Loans
4
Internal Revenue Service. Retirement Topics – Plan Loans
5
Internal Revenue Service. Retirement Plans FAQs Regarding Loans
6
Manulife John Hancock Retirement. What You Need to Know About 401(k) Loans
7
Internal Revenue Service. Plan Loan Offsets