April 2014
April 02, 2014

TRS: Borrowing from your retirement system contributions

Source: NYSUT United

Paul Farfaglia, Tim Southerton, Karen Magee and David Keefe.Q: Can I borrow money from my Teachers' Retirement System contributions?

A: You may borrow up to 75 percent of your personal TRS contributions — employer contributions are not eligible. Tier 3-6 members with at least one year of service credit and $1,334 in contributions, plus interest, can borrow a minimum of $1,000 once per calendar year. Tier 1-2 members can borrow a minimum of $300, must have personal contributions of at least $400 and may borrow once between Jan. 1 through June 30, and again between July 1 through Dec. 31.

If you choose to borrow against your TRS account take note — if you have an existing unpaid balance on a TRS loan, and borrow additional funds, you could face severe tax consequences if your combined loan balance exceeds $10,000. Additionally, the IRS requires that you disclose to TRS if you have an existing loan with a deferred compensation (457) plan, or a tax-sheltered annuity, 403(b) plan. TRS is required to consider these loan balances when calculating loan taxability and this could result in significant tax consequences on your TRS loan. For additional loan-related information, call 800-348-7298, ext. 6080.

Q: How do I repay a loan borrowed against my TRS account?

A: All new loans must be repaid by payroll deduction if you are employed by a TRS participating employer. Loans have a maximum five-year repayment schedule and are charged an annual interest rate of 5 percent for Tiers 1-2 members, and 7 percent for Tiers 3-6 members. A life insurance premium is charged at an annual rate of 0.10 percent, loans are fully insured after 30 days and a $30 service charge is added to your balance for each loan.

Other implications to consider are that partial payments are applied to the outstanding loan, but do not advance your due date or excuse you from any accrued charges. Additionally, fees of $10 per delinquent payment and $20 per returned check apply.

DID YOU KNOW

If you are a MyNYSTRS account holder, you can get a loan estimate and spec out different loan repayment and tax implications online. You can also electronically apply for a loan through your account. For more information, call 800-348-7298, ext. 6080, or visit https://secure.nystrs.org/sma/security/logon.aspx.