Answer: Federal returns/records should be retained 3 years from the due date of the return or 2 years after the date the tax was paid. Some documents should be kept longer, such as documents that establish basis (original cost to stock purchases, DRIP plan amounts, real estate purchase prices and capital improvements, real or intangible assets acquisition costs). For the State of Michigan records should be retained for five years after the filing of such returns.
Answer: No, a loan from a 401K is just a loan. When you default on the loan such as through a termination of employment the loan then turns into a distribution, taxable in the year of the default and possibly subject to an early withdrawal penalty.