1. Plan Rules: Most 401(k) plans have specific rules that require you to be an active employee to take out a loan. This is because the loan repayments are usually deducted directly from your paycheck.
2. Risk Management: Employers and plan administrators want to minimize the risk of default on the loan. If you’re no longer employed, there’s a higher risk that you might not be able to repay the loan.
3. Regulatory Requirements: There are also regulatory requirements that govern how 401(k) loans are administered, and these often include provisions that tie the loan to your employment status.
