DEAR HARRY: Back in 2012, I borrowed $40,000 from my company pension plan to give me a large enough down payment on a new home we bought. I saved .5 percent in interest on the mortgage. The payment schedule was set up to have the loan repaid before June 30, 2022.

I have just been offered a job at a new company that comes with a very substantial salary increase. I was told by a friend in my present controller's office that the company will demand full payment of the balance on the loan at the time I leave. She also said that the amount would not only be taxable, but that I'd get hit for the penalty because I'm not yet 59 1/2.

The new employer is offering me a plain unsecured loan to enable me to pay the existing loan back before I leave. Once I'm employed, they will make me a new loan from the pension to replace the old. Is this OK, or is there a better way?

WHAT HARRY SAYS: This could be technically OK, but I prefer to play it safe when it comes to Uncle Sam. When you rollover your present balance to the new company's plan, the "distribution" can be reduced to zero by a repayment within 60 days. This can be done by a nonpension loan. You can then take a new loan from the pension, but the terms will have to be limited to a five-year repayment schedule. That will be a little extra on your monthly payments, but the new salary should cover it.

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