Loans: Applying and Repaying

Retirement Online is the fastest and easiest way to apply for a loan with NYSLRS. You can see how much you are eligible to borrow, what the repayment amount would be and if your loan will be taxable. You can also find your current loan balance on any existing loans and manage your loan payments. Sign in to your Retirement Online account, then look under “My Account Summary” to see the available self-service loan features.

You may also print and mail in a loan application: Tiers 3, 4, 5 and 6 Loan Application (RS5025-A) or Tiers 1 and 2 Loan Application (RS5025). Please note that a paper application must be notarized.

Read the loan requirements below carefully before you apply. You may want to consult a tax advisor or accountant before applying for a loan from NYSLRS.

 


Before You Borrow

Loan Eligibility Requirements

You may borrow against your retirement contributions if you:

  • Are a member of the Employees’ Retirement System (ERS) or the Police and Fire Retirement System (PFRS) (you must have a minimum amount of contributions in your account — see chart below);
  • Have at least one year of service credit; and
  • Actively work for New York State or a participating employer. (If you are on leave without pay, you are not actively employed.)

For information about your loan eligibility or application status:

  • Sign in to your Retirement Online account. Once you are eligible for a NYSLRS loan, you can find out your specific borrowing limit and other important loan information through Retirement Online.
  • Call our automated phone service at 866-805-0990 or 518-474-7736 in the Albany, New York area (press 2 for members, then follow the prompts); or
  • Email us using our secure contact form.
ERS Tiers 3 – 6; PFRS Tiers 3 (Article 14), 5 and 6
How Much You Can Borrow The minimum loan is $1,000.

If you joined NYSLRS before January 1, 2018: You may borrow up to 75 percent of your contribution balance or $50,000, whichever is less; however, your loan may be taxable if it is for more than 50 percent of your contribution balance. You must have an account balance of at least $1,334 to borrow $1,000.

If you joined NYSLRS on or after January 1, 2018: You may borrow up to 50 percent of your contribution balance or $50,000, whichever is less. You must have an account balance of at least $2,000 to borrow $1,000.
Repayment period Within 5 years
Service charge per loan $45
Current interest rate  5.8%
Minimum payroll deduction At least 2% of your salary before taxes or deductions and an amount sufficient to repay the loan in full within five years from the date it was issued.
Frequency of loan applications 12 months. We reject early applications.
Insurance After 30 days, your loan is insured in case you die before retiring. We include premiums for this coverage in your payments.
ERS Tiers 1 and 2; PFRS Tiers 1, 2 and 3 (Article 11)
How Much You Can Borrow The minimum loan is $25.

75 percent of your contribution balance, or $50,000, whichever is less; however, your loan may be taxable if it is for more than 50 percent of your contribution balance.
Repayment period Within 5 years
Service charge per loan None
Current interest rate 5%
Minimum payroll deduction $3 if paid weekly, $5 if paid biweekly or semimonthly, $10 if paid monthly.
Frequency of loan applications 90 days
Insurance After 30 days, your loan is insured in case you die before retiring. We deduct premiums for this coverage annually from your retirement contributions.

 

Multiple Loans vs. Refinanced Loans

If you are considering a second loan, you may choose from two options:

  1. Multiple loans: With multiple loans, each loan has a separate five-year due date and minimum payment. These minimum payments are added together for a total minimum payment. This combined repayment amount for multiple loans is higher than the single amount for a refinanced loan, but with multiple loans, as each loan is paid off, the total minimum payment goes down.
  2. Refinance your existing loan: A refinanced loan allows you to add the new loan amount to your existing balance and refinance the entire amount as one loan instead of taking a separate loan. Minimum repayment amounts for refinanced loans are less than multiple loans because we combine your existing balance with the new loan and spread repayment out over another five-year term. However, this increases the portion of your loan that may be considered a taxable distribution, and federal withholding may significantly reduce the loan amount payable to you.

A NYSLRS Loan May Have Federal Tax Consequences

The Internal Revenue Service (IRS) may consider all or part of a NYSLRS loan taxable as a “deemed distribution from a qualified plan.”

When you apply using Retirement Online, the dollar amount that will be considered a taxable distribution, if any, will be provided to you.

If you take a taxable loan, NYSLRS will mail you a 1099-R tax form to file with your federal income tax return for the year you took the taxable loan.* If you take a taxable loan before you turn 59½, the IRS will charge an additional 10 percent tax penalty, unless an exception applies.

Your loan is exempt from New York State and local taxes.

Report Existing Loans from Other Retirement Plans

When applying for a NYSLRS loan, you must report any existing loans with a deferred compensation plan or tax-sheltered annuity through your employer. The IRS requires us to include balances from these loans when determining the taxable amount of your loan, if any. Section 2 of the loan application covers existing loans. You must complete it, or we will reject your application.

Tax Withholding and Citizenship

If you take a taxable loan, the IRS requires NYSLRS to withhold a percentage of your taxable amount from your loan, unless you indicate that you don’t want taxes withheld when you apply. The federal taxes withheld from a taxable loan distribution can vary with your citizenship status, so our loan application asks you your status as a U.S. citizen, resident alien or non-resident alien. If you are a U.S. citizen or a resident alien, the loan application is used as a substitute for the W-9 tax form for tax reporting. All non-resident aliens must complete a W-8BEN form. If we don’t receive a completed form, your application will be rejected.

  U.S. citizens and resident aliens: Non-resident aliens:
Percent of federal income tax to be withheld: U.S. address — optional 10% or zero.
Non-U.S. address — mandatory 10%.
30% unless there is a tax treaty between the U.S. and your home country which provides an exemption or reduced rate.

The amount that NYSLRS withholds for federal income tax is the minimum that the IRS requires us to withhold. It may not be the total tax that you owe. Please refer to IRS Publication 505, Tax Withholding and Estimated Tax, or contact your tax advisor for additional information.

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Repaying Your Loan

Once you submit a loan application and we issue a check, you are responsible for repaying the loan. You cannot return an uncashed check, and the loan fee is nonrefundable.

Members must repay loans through payroll deductions. When you apply, you choose a payment rate, and we work with your employer to deduct that amount from your earnings.

If you choose to repay the minimum amount, your payroll deduction may be increased periodically to ensure your loan will be paid within the required five-year repayment term. This increase can occur if several pay periods elapse between the date your loan is issued and when your payroll deductions begin. Generally, your payment increase will be small, but if you miss a number of loan payments (for example, if you go on leave without pay and you don’t make up the missed payments), your increase could be more significant.

Change Your Payroll Deductions or Make Lump Sum Payments

You can increase your payroll deduction amount, make additional payments or pay your loan in full at any time with no prepayment penalties.

Retirement Online is the easiest way to manage your loan payments. You can check your payoff balance, make a payment, review your payment history or change your payment amount. You can also use a calculator to estimate a payment amount based on a payoff date, or estimate a payoff date based on a payment amount. Sign in to your account and select ‘Manage my Loans’ to see a list of your loans and to choose which one you want to pay.

You can also check your loan balance by calling our automated phone service at 866-805-0990 (518-474-7736 in the Albany, New York area). Press 2 for members, then follow the prompts.

To increase your payroll deduction amount or make an additional payment by mail:

If you want to: Write to: And include:
Change your payroll deduction NYSLRS
Attn: Loan Unit
110 State Street
Albany, NY 12244
A letter with your name, NYSLRS ID (or last four digits of your Social Security number), current payment amount, new payment amount and your signature
Make additional payments NYSLRS
Attn: Accounts Receivable
110 State Street
Albany, NY 12244
A check or money order payable to the New York State and Local Retirement System, with “loan payment” and your NYSLRS ID (or last four digits of your Social Security number) written on the payment

Paying Off Your NYSLRS Loan

NYSLRS will tell your employer when to stop payroll deductions. Generally, if you pay your loan through regular payroll deductions, your employer will be notified before your loan is paid off. If you pay off your loan in a lump-sum payment, either through Retirement Online or by check or money order, be aware that it can take several pay periods for your employer to stop payroll deductions. Retirement Online is the fastest and easiest way to check your loan payoff amount and pay off your loan.

If you have only one outstanding NYSLRS loan, and you overpay on that loan, you will be refunded the amount overpaid. Generally, the refund will come from your employer, either as a separate check or as part of your regular paycheck. If you have multiple loans, and you overpay on some but not all of the loans, we will apply the amount overpaid to the balance of your existing outstanding loans.

Retiring With an Outstanding Loan

If you retire with an outstanding loan, your pension will be reduced. The pension reduction amounts are provided when you apply using Retirement Online, and they are listed on the loan applications on our Forms webpage. In most cases, you will also need to report at least some portion of the loan balance as ordinary income (subject to federal income tax) to the Internal Revenue Service (IRS). If you retire before age 59½, the IRS will charge an additional 10 percent penalty, unless an exception applies. You will receive a 1099-R to file with your taxes.* You must include the loan on your federal income tax return for the year the tax form is issued.

If you are nearing retirement, be sure to check your loan balance. If you are not on track to repay your loan before you retire, you can increase your loan payments, make additional lump sum payments or both (see Change Your Payroll Deductions or Make Lump Sum Payments.)

ERS members may repay their loan after retiring. If you choose to pay back your loan after you retire, you must pay back the full amount of the outstanding balance that was due when you retired in one lump-sum payment. Following your full repayment, your pension benefit will be increased from that point going forward, but it will not be adjusted retroactively back to your date of retirement. For details, including tax information, visit Repaying Your NYSLRS Loan after Retirement.

What Happens If You Go Off Payroll?

Loan payments are made by payroll deductions, but if you go off payroll (for example, furlough, leave of absence or termination), to avoid your loan going into default, you must make minimum payments at least quarterly and repay the loan within five years. To avoid a default, contact us as soon as you leave public employment, so we can tell you the exact amount you need to pay. If you are in danger of defaulting on your loan, we will notify you. Retirement Online is the easiest way to make loan payments if you are off payroll (see Make Lump Sum Payments information above).

If you are on an authorized leave of absence with your employer, the IRS allows for the suspension of loan payments for up to one year from the date your leave began or until you return to the payroll, whichever occurs first. In order to receive this deferment, you must have your employer send a fax to us (518-486-9877), on their letterhead, indicating the date your leave began and when they predict it will end.

Please be aware, however, that if you defer your loan payments while on an authorized leave of absence, your minimum payment will need to be recalculated and your payment will likely increase when the period of deferment ends in order to ensure your loan is still paid off within five years.

What Happens If You Default On Your Loan?

You must make payments at least quarterly and pay your loan back within five years. Your loan will default if either condition is not met.

What you should know:

  • We’re required by law to report your outstanding loan balance to the IRS as a taxable distribution to you.
  • You will receive a 1099-R to file with your taxes.* You must include the loan on your federal income tax return for the year the loan defaults.
  • If you are younger than 59½ in the year the loan defaults, the IRS will charge an additional 10 percent penalty on the taxable portion of the loan, unless an exception applies.
  • You still owe NYSLRS the amount of the outstanding loan. The outstanding loan balance will continue to accrue both interest and insurance charges until it is paid in full or you retire, whichever occurs first.
  • We can’t issue a new loan until you repay the defaulted loan.
  • Defaulted loans do not appear on your credit history.

Loan Payment Deferment for Active Military Personnel

If you’re on active military duty, you may be able to defer your payments.

What you should know:

  • You must resume payments after your active duty ends.
  • Interest continues to accrue on your loan balance while you’re on active duty. The interest rate is 5.8 percent for Tier 3, 4, 5 or 6 members whose loans were approved prior to active military service.
  • We extend the five-year repayment period by the length of time you are on active duty.

To apply for a deferment, email your request using our secure contact form and attach a copy of your orders. You can also fax your request to 518-486-9877 or mail your request to:

NYSLRS
Loan Unit
110 State Street
Albany, NY 12244

When you return from active duty, please send us a copy of your release papers or DD-214.

*Most members who take a taxable loan, retire with a taxable loan or default on their loan will receive a 1099-R form to file with your federal taxes. Some members will receive a 1042-S form instead.

 


(Rev. 2/21)

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