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Office of the New York State Comptroller’s Seal

NYS Comptroller

Thomas P. DiNapoli

Coordinated Plan

For ERS Tier 3 and 4 Members

(Articles 14 and 15)

Borrowing Against Your Contributions

If you meet eligibility requirements, you may take a loan from the Retirement System. To apply, you must file a Loan Application (RS5025-A) Adobe pdf with us.

Please note: If you retire with an outstanding loan balance, your retirement benefit will be permanently reduced. You cannot pay off your loan once you retire. The amount of your pension reduction will be based on your age, the loan balance at retirement and the type of retirement (service or disability).

Before you apply, you should be aware of the federal tax laws pertaining to Retirement System loans. Your loan will be taxable if:

  • The loan amount exceeds federal limits.
  • You have a loan with a deferred compensation (457) or tax-sheltered annuity (403-b) plan through a New York State employer that causes your loan to exceed the federal limits for nontaxable loans. Exceeding these limits could result in significant tax consequences for you.
  • You do not make the required payments on your loan at least once every three months or do not complete payment within five years from the date the loan was issued.
  • You retire or withdraw from the Retirement System and have one or more outstanding loan balances.

If your loan is taxable, or becomes taxable as described above, you must include it on your federal income tax return for the year the loan is granted or becomes taxable. If you are under age 59½ at the time, you may be required to pay a 10 percent penalty tax in addition to any ordinary federal income tax you owe. Please consider consulting a tax advisor before applying for a taxable loan from the Retirement System.

If you already have an outstanding loan with us and want to take another loan, please contact our Call Center at 1-866-805-0990 (or 518-474-7736 if you live in the Albany, NY area) and connect with our automated information line to determine if refinancing your current loan or carrying multiple loans would be better for you. Once you access the loan menu, you can receive specific information relating to your account for multiple and refinanced loans or you can speak directly to a customer service representative. Although the repayment amount may be larger if you choose multiple loans, the taxable amount of a refinanced loan is always higher, unless the entire refinanced loan is nontaxable.

The following rules apply when borrowing against your contributions:

  • You must be in active service and have one year of member service credit.
  • Each loan must be for a minimum of $1,000, and the total of all your loans may not be more than 75 percent of your contribution balance. Therefore, you must have an account balance of at least $1,334.
  • You repay each outstanding loan through payroll deductions in an amount sufficient to repay the loan, interest and insurance premium within five years. The minimum deduction to repay your outstanding loan balances must be at least 2 percent of your salary.
  • You may borrow only once in any 12-month period.
  • Prior to retirement, and 30 days after issuance, loans are fully insured in case you die before repaying them.

These are examples of how your service retirement benefit will be permanently reduced by an outstanding loan balance at retirement. The approximate reductions are for calendar year 2016. The amount of the reduction changes annually.

At Age Outstanding Loan Balance Annual Pension Reduction
55 $5,000 $254
$10,000 $508
60 $5,000 $279
$10,000 $557
62 $5,000 $291
$10,000 $581