This is something of a multi step question.
Neither my 401k loan documents, nor the company plan documents make any mention of partial prepayments not acceptable by the plan.
The situation - I sent in a sum larger than a couple years worth of payment. In the absence of any declarations, it had not occurred to me that I would not be paying down principle.
The amount was accepted and deposited by the administration firm, but I found out later that they simply put most of it in the interest catagory and much smaller amount into the principle category.
Calling them, they state they follow the amortization schedule. So, in essence they are saying I've made a years worth of payments and are going to pretend they have all been received over the course of a year. Since the money is all going to my account, I can't say I'm being cheated, however this does raise some interesting questions.
Have I found a very unusual loophole that allows me to make large additional payments into my 401k account that are completely outside of the regulations. For example, if loan is 30,000, and I send them 5000, they would 4100 into interest and 900 against principle. It seems that using this method, by simply not paying the full payoff amount, I could basically stick the total interest amount into my 401k account within just a few years, not the extended number on the amortization schedule. Using the extreme extrapolation, by their method, I could potentially put an extra 65 grand into my 401k in interest alone over the course a year
If the administrator claims they 'do no allow' partial repayments, should they have accepted the deposit in the first place? If no, does this acceptance imply allowing prepayments?
Finally, another interesting twist. I'll be eligible for non penalty withdrawals in six years, can I use this a method to early fund as much of this of this loans interest into my 401k at my option and let whatever principle is left at when I'm eligible default into a normal distribution?
Neither my 401k loan documents, nor the company plan documents make any mention of partial prepayments not acceptable by the plan.
The situation - I sent in a sum larger than a couple years worth of payment. In the absence of any declarations, it had not occurred to me that I would not be paying down principle.
The amount was accepted and deposited by the administration firm, but I found out later that they simply put most of it in the interest catagory and much smaller amount into the principle category.
Calling them, they state they follow the amortization schedule. So, in essence they are saying I've made a years worth of payments and are going to pretend they have all been received over the course of a year. Since the money is all going to my account, I can't say I'm being cheated, however this does raise some interesting questions.
Have I found a very unusual loophole that allows me to make large additional payments into my 401k account that are completely outside of the regulations. For example, if loan is 30,000, and I send them 5000, they would 4100 into interest and 900 against principle. It seems that using this method, by simply not paying the full payoff amount, I could basically stick the total interest amount into my 401k account within just a few years, not the extended number on the amortization schedule. Using the extreme extrapolation, by their method, I could potentially put an extra 65 grand into my 401k in interest alone over the course a year
If the administrator claims they 'do no allow' partial repayments, should they have accepted the deposit in the first place? If no, does this acceptance imply allowing prepayments?
Finally, another interesting twist. I'll be eligible for non penalty withdrawals in six years, can I use this a method to early fund as much of this of this loans interest into my 401k at my option and let whatever principle is left at when I'm eligible default into a normal distribution?
