Cash out 401k keep loan active?

[Guest HRNewb]

John is over the age of 59.5 and is permitted to take a withdrawal.

He is still under employment and would like to cash out his account, keep it active and keep repaying back on his loan.

Can John cash it out completely and repay per payroll or must he keep enough in his account to cover the loan balance?

[MoJo]

John is over the age of 59.5 and is permitted to take a withdrawal.

He is still under employment and would like to cash out his account, keep it active and keep repaying back on his loan.

Can John cash it out completely and repay per payroll or must he keep enough in his account to cover the loan balance?

He can cash out the "cash" (non-loan) portion of his account. The portion of his account invested in the loan remains in the plan, and turns to cash as each payment is made and the loan balance is amortized. There is no need to keep any "additional" amount in the plan - the loan itself represents the balance that continues to secure the loan.