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| If a participant loan doesnt satisfy the 5year, quarterly payment requirement, the entire loan is taxable, including a loan that is within the dollar limit. | Defaulting on a 403 b loan typically results in the outstanding balance being treated as a taxable distribution, subject to income tax and possibly a 10% early withdrawal penalty if under age 59½. | A plan loan’s grace period can’t continue beyond the last day of the calendar quarter following the calendar quarter in which the required installment payment was due. |
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