New Jersey Administrative Code › Title 17 - TREASURY - GENERAL › Chapter 2 - PUBLIC EMPLOYEES' RETIREMENT SYSTEM › Subchapter 4 - MEMBERSHIP › Section 17:2-4.9 - Loans

Current through Register Vol. 56, No. 14, July 15, 2024
(a) Only active contributing members of the
				System may exercise the privilege of obtaining a loan. The member's total
				outstanding loan balance shall not exceed the lesser of 50 percent of the
				accumulated deductions posted to the member's account or $ 50,000. The loan is
				subject to I.R.C. § 72(p) (2007) of the Internal Revenue Code.
(b) The rate of interest per annum for loans
				from the State-administered retirement systems shall be a commercially
				reasonable rate as required by the Internal Revenue Code to be determined by
				the State Treasurer on January 1 of each calendar year. An administrative fee
				in an amount set by the State Treasurer for each calendar year may be charged
				for any loan requested pursuant to
				43:15A-34.
(c) All pension loans must be repaid within a
				period not to exceed five years. If the member has an outstanding loan balance
				and applies for a new loan, the entire balance must be repaid within five years
				of the date of the first loan. Furthermore, the new loan amount, when added to
				the highest balance due (without interest) during the prior 12-month period for
				all loans from all retirement plans cannot exceed $ 50,000. The $ 50,000
				maximum limit includes all retirement plans the member has an interest in due
				to his or her employment relationship with the State and/or any other
				governmental plans sponsored or administered by a public sector employer in New
				Jersey. Loan amounts above the $ 50,000 aggregate limit shall be deemed a
				distribution, which is subject to additional tax.
(d) If a member's loan, or portion of a loan,
				is deemed a distribution pursuant to (c) above, the member is still required to
				repay the full amount of the outstanding loan, including any portion deemed a
				distribution, unless the member terminates his or her account by withdrawing
				his or her contributions. If the member withdraws from the retirement system,
				the settlement will be the net amount of the member's contributions minus the
				outstanding loan. If the member returns to work and the member's account is
				reactivated, or the member retires, the member must repay the full amount of
				the outstanding loan with additional interest computed from the date the member
				stopped making loan payments.
(e)
				Pursuant to I.R.C. § 72 (p)(2)(C), members must make regular periodic
				payments to repay their outstanding loans. If a member obtains a loan and fails
				to make required loan repayments for three consecutive months, the Division
				will send a letter to the member requesting payment within 30 days. If the
				payment is not made, the Division will treat the outstanding loan as a deemed
				pension distribution. A deemed distribution cannot be canceled by resuming loan
				payments or repaying the loan in full. Unlike a normal pension distribution, a
				loan treated as a distribution cannot be rolled over to an Individual
				Retirement Account (IRA) or another qualified retirement plan.