[RickFLM4]

I’d look into the rules about employers being able to force her to move the money out. I thought there were some laws around this if the balance is over a certain amount. Leaving it there until she understands all options and being eligible for her new employer’s plan would be the first choice, if possible.

If they are legally allowed to force her to move it out and she isn’t eligible for her new employer’s plan yet, her only options will be to move it to an account like a an IRA (tax free rollover) or take a withdrawal. She would need to pay tax on the withdrawal plus (unless she qualifies for a hardship) 10%. As kscarrol noted you can’t borrow against an IRA.

Maybe she can roll it into an IRA, park it temporarily and then move it into the new 401k. Honestly, not sure if that’s possible or not. Her best bet is to ask her new employer if they can work that out and if it would be eligible to borrow once she’s in the new plan. She may not be able to borrow against it in her new plan even if you figure out a way to get the money in it.

One caution about 401k loans is if she changes jobs again before the 401k loan is paid off, it can create an unintended early distribution, with penalty (unless you pay it off). My BIL had a 401k loan and changed jobs but couldn’t roll the 401k loan or borrow against the rolled over balance from the new plan. He doesn’t have the funds to repay the loan, so he’s going to have to pay tax + 10% on the remaining loan balance that will be treated as an early distribution. (I suspect he doesn’t have the funds to pay the tax + penalty either so I’ll be hearing about it again in early April…)