I have a client who currently has a 403b and an outstanding loan of about $13000. She terminated her employment on 6-23-06 and her DOB is 4-1-52 so she was 54 at termination. She now would like to roll that 403b into an IRA. The way I understand the rule is if she terminated employment at age 55 or later she would not be subject to the 10% penalty on the loan amount, but since she terminated before age 55 and now wants to move to an IRA at age 56 she is subject to the 10% penalty on the loan or has to repay the loan. Could anyone shed some light on this situation please?