It’s better to pay off a pension loan prior to retirement.

Many active members take out pension loans, but do not pay it off prior to deciding to retire. The TWU Retirees Association advises members to fully pay off the loan prior to retirement for several reasons, including:

The loan amount becomes a distribution as far
as IRS is concerned. You will be required to pay income tax on it for that year.

Your pension will be permanently decreased. Therefore, in effect the loan will never get paid off.

The Local 100 Retiree Association encourages you to seek alternate solutions to settle your loan prior to your retirement, so as to avoid permanently reducing your pension, and also to avoid the unnecessary taxes on the distribution.