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If you meet eligibility requirements, you may take a loan from NYSLRS. The following rules apply when borrowing against your contributions:
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- You must be in active service and have one year of member service credit.
- 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.
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How Much You Can Borrow
The minimum loan is $1,000.
The maximum loan is 75 percent of your contribution balance, minus any outstanding loan balance, so you must have an account balance of at least $1,334.
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Retiring With an Outstanding Loan1
If you retire with an outstanding loan, your retirement benefit will be reduced. 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).
Here 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 2021. The amount of the reduction changes annually.
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| At Age | Outstanding Loan Balance | Annual Pension Reduction |
|---|---|---|
| 55 | $5,000 | $208 |
| $10,000 | $417 | |
| 60 | $5,000 | $233 |
| $10,000 | $467 | |
| 62 | $5,000 | $246 |
| $10,000 | $491 |
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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), and you may also be subject to a tax penalty. If your loan is subject to federal income tax, NYSLRS will mail you a 1099-R form after the end of the calendar year.
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. Check your loan balance. If you are not on track to repay your loan before you retire, you can increase your loan repayments, make additional lump sum payments, or both.
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Your Loan May Be Federally Taxable
Before you apply, you should be aware of the federal tax laws pertaining to NYSLRS loans. Your loan will be taxable if:
- The loan amount exceeds federal limits (federal tax information is available on the loan application).
- You have a loan with a deferred compensation (457) or tax-sheltered annuity (403-b) plan through your current 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 NYSLRS 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 NYSLRS.
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To Apply
Online: Sign in to Retirement Online, our self-service tool that gives you secure access to your retirement account information. It is the fastest, most convenient way to apply for a loan. You can also see how much you are eligible to borrow, what the repayment amount would be and if your loan will be taxable.
By Mail: Print a loan application from our Forms page and mail your completed application to NYSLRS. Applying by mail adds processing time to your loan.
If you already have an outstanding loan with NYSLRS and want to take another loan: Sign in to your Retirement Online account to see if your loan will be taxable and to help you determine if refinancing your current loan or carrying multiple loans would be better for you.
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.
With a refinanced loan, you add the new loan amount to your existing balance and refinance the entire amount as one new loan. The minimum repayment amount for a refinanced loan is lower because repayment of the total amount is spread out over another five years. The taxable amount of a refinanced loan is always higher (unless the entire loan is nontaxable), so federal withholding can significantly reduce the loan amount payable to you.
You can also 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. 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.
Section Updated 4/21 – ERS Matrix
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