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

A John Hancock 401(k) loan is available if your employer’s plan document includes the loan feature, and federal law caps the amount at the lesser of $50,000 or 50% of your vested balance, with a standard five-year repayment schedule. John Hancock administers the account, but your employer sets the rules on whether loans are allowed, how many you can have at once, and what minimum balance applies. The Summary Plan Description is where those employer-specific terms live.

Does Your Plan Allow Loans

A 401(k) plan is permitted, but not required, to offer loans to participants.¹ Your employer makes that call when setting up the plan. If loans are allowed, you generally need to be an active employee currently participating in the plan to request one. Former employees and retirees holding a balance usually cannot initiate a new loan.

You also need a sufficient vested balance, meaning the portion of the account that belongs to you based on your contributions and years of service. Plans often set a minimum loan amount around $1,000 and cap the number of outstanding loans at one or two. If you have hit that cap, you will need to repay an existing loan before taking a new one. The Summary Plan Description spells out these employer-specific restrictions.¹

How Much You Can Borrow

Under 26 U.S.C. § 72(p), you can borrow the lesser of:²

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

The $10,000 floor matters when your balance is small. If you have $16,000 vested, 50% is only $8,000, but the floor raises your maximum to $10,000.²

The 12-Month Lookback

The $50,000 cap is not flat. It gets reduced by the difference between the highest outstanding loan balance you carried in the 12 months before the new loan and the balance you owe on the day the new loan is issued.³ If you had a $30,000 loan balance six months ago and have since paid it down to $5,000, your cap drops to $25,000. Your new loan plus any remaining balance also cannot exceed that adjusted cap.

Repayment and Interest

The standard repayment period is five years, with payments due at least quarterly.⁴ Most plans deduct payments automatically from your paycheck. If the loan is used to buy your primary residence, federal law allows a longer repayment period, though the statute does not set a specific maximum.⁵ Plan documents commonly extend residential loans to 10 or 15 years.

The interest rate must be “reasonable” under Department of Labor rules.¹ Most plans use prime plus 1% as an industry convention. All interest you pay goes back into your own account; you are paying yourself, which partly offsets the investment growth you miss while the money is out of the market.

The Double-Tax Catch on a Traditional 401(k)

Your original pre-tax contributions went in before taxes. Loan repayments, including interest, come out of take-home pay that has already been taxed. When you eventually withdraw the money in retirement, the full balance is taxed again as ordinary income. The interest portion of your repayments effectively gets taxed twice: once when you earn the money to repay it, and again at withdrawal.

Spousal Consent

Some qualified plans require written spousal consent for loans above $5,000. Most 401(k) plans are structured as profit-sharing plans and are exempt from that requirement if the plan pays the full death benefit to a surviving spouse, offers no life annuity payout option, and was not funded by a transfer from a plan with survivor annuity protections.⁴ Check the Summary Plan Description to confirm whether consent applies to your account.

Requesting the Loan Through John Hancock

Log in to the participant portal at myplan.johnhancock.com. The loan request section shows your current vested balance and the amount you are eligible to borrow. Before starting, pull together:

The dollar amount you want to borrow, within the federal and plan limits.
The loan purpose, since a primary-residence loan can qualify for a longer repayment term.
Your repayment frequency, which usually tracks your payroll schedule.
Your bank routing and account numbers for electronic deposit. A paper check takes longer.

The portal walks you through a review screen where you confirm the terms and electronically sign a promissory note, which is your binding agreement to repay on schedule. The request may route to your employer’s plan administrator for approval against the plan’s rules.

Timing and Fees

After approval, John Hancock sells enough of your investments to fund the loan. Trade settlement generally takes one to two business days. An electronic transfer typically reaches your bank within three to five business days after that. A paper check can take up to ten business days by mail.

Many plans charge a loan origination fee and an ongoing annual maintenance fee, both deducted from your account balance rather than from the loan proceeds. These fees typically run $50 to $75 each and vary by plan.⁶ Your fee disclosure document lists the exact amounts.

If You Leave Your Job With a Loan Outstanding

Separating from your employer, whether by quitting, layoff, or retirement, puts an outstanding loan at risk. Most plans require repayment within a short window after separation, often 60 to 90 days. If you cannot repay, the plan reduces your account by the unpaid balance. That reduction is a plan loan offset, and the IRS treats it as a taxable distribution.

You do have breathing room. When the offset is triggered by separation or plan termination, you can roll the offset amount into an IRA or another eligible retirement plan by the due date, including extensions, of your federal income tax return for that year.⁵ For most filers with an extension, that means until October 15 of the following year.⁷ A successful rollover avoids both income tax and the early distribution penalty on the offset.

If You Default While Still Employed

Missing payments while you are still working triggers a “deemed distribution.” The plan administrator reports the unpaid balance to the IRS on Form 1099-R, and that amount becomes taxable income for the year.⁴ Unlike a plan loan offset at separation, a deemed distribution cannot be rolled over.

If you are under 59½ when the deemed distribution occurs, an additional 10% early distribution tax applies to the taxable amount.² On a $20,000 default in the 22% bracket, that works out to roughly $6,400 in combined federal taxes on top of losing the retirement savings. If your paycheck cycle changes or you switch to a role with less frequent pay, confirm your payment schedule stays on track.

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