MMC Benefits Handbook
Comparison with Withdrawals
The consequences of borrowing from your MMA 401(k) Savings & Investment Plan account differ from withdrawals in the ways listed below.
- You pay no income taxes on the amount you receive as a loan.
- You pay no additional taxes on the loan, regardless of your age if you continue your repayments on time. In contrast, if you make a withdrawal from the Plan when you are under age 59-1/2, you usually must pay a 10% Federal early withdrawal tax on the taxable amount withdrawn in addition to ordinary income taxes.
- When you repay the loan, both the principal and interest are returned to your Plan account.
- A loan deemed distributed will be treated as an outstanding loan when determining the number of loans you have outstanding and amount available for a loan.
- Taking a loan may affect your tax treatment when you leave the Company if you are planning to take an in-kind distribution of Marsh & McLennan Companies stock.
- Plan loan interest that you pay is not tax deductible.
- Loan proceeds are not eligible for rollover.
- Loans may not exceed $50,000 (loans outstanding over the prior 12 months will be added back to determine whether this limit has been exceeded) or 50% of the vested value of your Plan account, whichever is less.
- You can only repay your loan on an after-tax basis. The amount of the loan and interest that you pay on your loan (and that is credited to your account) may not be tax-deductible and will be taxable to you when it is later distributed from the Plan; except to the extent the distribution includes your after-tax contributions. (You may want to consult with a tax professional.)
- You must continue to make loan repayments during a leave of absence, although special rules apply if you are on military leave.
- The loan must be repaid within 90 days if you terminate employment and if it is not, your outstanding loan balance will be treated as a distribution, your vested account balance will be reduced by the amount of the outstanding loan, and you will owe Federal income taxes on the unpaid balance of your loan (including interest) plus an additional 10% Federal early withdrawal tax if you are under age 59-1/2 and one of the IRS exceptions does not apply to you.
- If your loan is deemed distributed due to non-payment, you will be liable for all taxes when you file your tax return. (You may want to consult with a tax professional.)