Important Information Regarding Loans
IRS regulations went into effect in 2004 changing the method for calculating the taxability of refinanced (combining an existing loan with a new loan) loans issued by the New York State and Local Retirement System. This bulletin provides information on how the tax calculation may affect you.
Members Not Affected By The Regulations
- If you do not have an outstanding loan at the time a new loan is granted, you will not be affected by the tax calculation. This calculation is on refinanced loans only.
- If your contribution balance is $6,667 or less at the time of the new loan, you will not be affected by the tax calculation. This contribution balance permits a maximum outstanding loan balance of $5,000, which would not be taxable under this calculation.
Two Loan Options Available To Members With Outstanding Loans
If you have an outstanding loan at the time a new loan is granted, you are able to choose from two loan options:
- Refinance — refinancing of your existing loan. In most instances, refinancing your existing loan will result in a higher amount being subject to Federal income tax. However, your minimum repayment amount will be less than under the multiple loan option.
- Multiple Loans — taking a new, separate loan in addition to your existing loan. To minimize the effect of the tax calculation, you can choose to take a new, separate loan. Multiple loans will result in a higher minimum payment. Although separate payments will be applied against each outstanding loan, the amounts will be combined so that only one payroll deduction is taken from your paycheck.
For More Information
You can call our automated information line, toll-free at 1-866-805-0990 or 518-474-7736 within the Albany, New York area, for information regarding your loan eligibility, refinanced and multiple loans. To find out which loan option is best for you, we strongly encourage you to call this number prior to submitting a loan application.
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