PENSION LOANS
Interest Rate and Fee | Application Instructions | Loan Eligibility
Repayment Information | IRS 5-Year Rule and Multiple Loans
Account
Quarterly Posting Dates (opens in new window)
INTEREST RATE AND ADMINISTRATIVE FEE
Loan
Applications Received During Calendar Year 2013
Interest
is charged on a loan at a commercially
reasonable rate set annually by the New Jersey State Treasurer.
- For eligible borrowers, the interest rate for loan applications received in 2013 is 5.25% per annum on the declining
balance of the loan.
An administrative processing fee also applies to all pension
loans.
- The administrative processing fee is $8.00 per loan.
The interest rate for 2013 is determined using the Prime Rate as of December 1, 2012 plus two percent. The administrative processing
fee is set annually and is based on the actual
costs associated with administering the pension loan program.
The loan interest rate is fixed annually,
so if you borrow in 2013 you will have the same interest rate
for the life of your loan unless you borrow again after
the 2013 calendar year has ended. Every time a member
borrows against their available loan balance, the entire outstanding
balance is re-certified for the current year's interest
rate.
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For complete information about pension
loans see Fact
Sheet #81, Pension Loans Adobe PDF (33K)
APPLICATION INSTRUCTIONS
PAPER LOAN APPLICATIONS ARE NO LONGER ACCEPTED
PERS, TPAF, PFRS, or SPRS
members must submit loan requests using
the
Loan Application
programs of the Member Benefits Online System (MBOS) or the Automated Information System at (609) 292-7524.
When using MBOS or the Automated Information System you can
determine your eligibility to borrow,
the maximum amount you may borrow,
and calculate various repayment options. Upon application you will receive confirmation that
your Loan Application
is received
along with
the date your loan check will
be mailed.
MEMBER BENEFITS ONLINE SYSTEM
Register and log on now - available 24 hours-a-day! 7 days-a-week!
AUTOMATED INFORMATION SYSTEM
Now with Interactive Voice Response Technology - available 24 hours-a-day! 7 days-a-week!
- Call the Automated Information System at (609) 292-7524 from your touch-tone phone. Please have your Pension Membership Number or Social Security number available when you call.
- Find out more about the Automated Information System! Adobe PDF (30K)
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ALL LOANS MUST BE REPAID WITHIN 5 YEARS
Internal Revenue Service regulations require
that all loans taken after January 1, 2004, have a maximum
repayment schedule of five years.
If you have an outstanding pension loan balance and
plan take another loan, you must repay the combined balance of the original loan and all
subsequent loans within five years of the issuance date
of the FIRST LOAN. Find
out more about multiple loans.
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For complete information about pension
loans see Fact
Sheet #81, Pension Loans Adobe PDF (33K)
LOAN ELIGIBILITY
WHEN CAN I BORROW
You Must Have at Least Three Years
of Service Credit and Contributions Posted to Your Pension
Account. Pension
credit is “posted” to your account on a quarterly
basis. It normally takes 45 days after the end of a quarter
for your membership credit to be posted to your account.
You Must Be an Actively
Contributing Member. Only members who are actively
working and making pension contributions may take a loan.
If you have recently returned to work after a leave of absence
without pay or have changed employers within the last six
months, your employer must certify the bottom portion of the
loan application that you have returned to employment.
HOW MUCH YOU CAN BORROW
The minimum amount
you may borrow is $50. Loans then increase in multiples of $10. You may borrow up to one-half of your
posted pension contributions to a maximum of $50,000, whichever
is less.
NUMBER OF LOANS PER YEAR
You may borrow twice in any calendar year. This is determined
by the date of the loan check, not the date of the request.
For example, if you make a request for a loan on December
28, 2012 and the check is dated January 2, 2013, the loan
is considered your first for the year 2013.
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For complete information about pension
loans see Fact
Sheet #81, Pension Loans Adobe PDF (33K)
LOAN REPAYMENT INFORMATION
REPAYMENT AMOUNT
The minimum deduction toward
repayment of any new loan is equal to the normal pension
contribution rate of your salary at the time you apply for
the loan. In most instances,
your minimum loan repayment amount will be the same whether
you borrow $500 or $5,000; however, the repayment of a larger
loan will continue for a longer period of time than for a
smaller loan.
Note: Chapter 78, P.L. 2011, the Pension and Health Benefit Reform Law, increased the pension contribution rates for retirement system members — find out more here.
The maximum deduction toward the repayment
of your loan is 25% of your base salary.
LOANS MUST BE REPAID
WITHIN FIVE YEARS!
IRS regulations require
that all loans taken after January 1, 2004, have a maximum
repayment schedule of five years.
MULTIPLE LOANS
Members who take multiple loans must repay the outstanding
balance of the original loan and all subsequent loans taken
before the original loan is completely paid off within
five years of the issuance of the first loan.
If you have an outstanding loan balance
and wish to take another loan before your current balance
is paid off, you may still apply for a loan using any of the
available methods, but the repayment amount may
be substantially higher, to ensure full repayment
of the total loan balance within five years of the issuance
of the original loan. Furthermore, the new loan amount may
be reduced, or the loan request may be rejected, if the payroll
deductions required to repay the loan within this five-year
period would exceed the 25% of pay restriction in State
law.
For more information see
the poster,
Have You Taken a Pension Loan Since January 1, 2004
Adobe
PDF (50K)
CANCELING A LOAN
If you
are not satisfied with the loan amount or the repayment schedule
when you receive your check, you may cancel the loan by returning
the original unmarked and uncashed loan check.
Note: By cashing
the loan check you are agreeing to the loan amount and
the terms and conditions of the repayment schedule.
When a loan check is returned, the funds are deposited back into your pension account and any remaining loan balance will be recertified using the current interest rate. The returned funds may again become available to borrow after the next quarter is posted.
TIMELY REPAYMENT
IRS regulations require
members to make timely payments toward outstanding loan balances.
If you take a leave of absence without pay for more than three
months, you will be notified of non-payment toward the balance
of your outstanding loan and offered the choice of making
a lump-sum payment for the balance and interest; or repayment
of the loan through monthly installments through personal
billing.
The number of loan payments and the amount of interest is dependent upon continuous repayment. If you are off payroll for any reason and your loan deductions are not remitted as scheduled, your loan balance will accrue additional interest. It is important that you notify the Division of Pensions and Benefits immediately upon your return to payroll so your loan plus additional accrued interest can be recertified. Failure to notify the Division in a timely manner will cause additional interest to accrue.
FAILURE TO REPAY
Failure
to repay a loan as scheduled may result in the unpaid loan
balance being declared a taxable distribution. If the loan
is determined to be in default, the loan will be considered
a distribution from your pension account and reported to the
IRS. For the tax year in which the default occurs, the Division
of Pensions and Benefits will send you a Form 1099-R
for tax filing purposes in January of the following year.
For Additional Loan Regulations and
Information see Fact Sheet #81, Pension Loans Adobe PDF (33K)
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