§ 613-A — Loans to members of a teachers' retirement system

§ 613-a. Loans to members of a teachers' retirement system. a. 1. A\nmember of a teachers' retirement system in active service who has credit\nfor at least one year of member service may borrow, no more than once\nduring each twelve-month period, an amount not exceeding seventy-five\npercent of the total contributions made pursuant to section six hundred\nthirteen of this article (including interest credited at the rate set\nforth in subdivision c of section six hundred thirteen compounded\nannually) and not less than one thousand dollars.\n 2. A member of the New York state teachers' retirement system who\nfirst joins such system on or after July first, two thousand twenty-two\nin active service and who has credit for at least one year of member\nservice may borrow, no more than once during each twelve-month period,\nan amount, not less than one thousand dollars and which would not cause\nthe balance owed pursuant to this section, including any amounts\nborrowed then outstanding, to exceed (i) fifty percent of the member's\ntotal contributions made pursuant to section six hundred thirteen of\nthis article (including interest credited at the rate set forth in\nsubdivision c of this section compounded annually); or (ii) fifty\nthousand dollars, whichever is less.\n b. An amount so borrowed, together with interest on any unpaid balance\nthereof, shall be repaid in equal installments which shall be made by\nthe borrower directly to the retirement board or through regular payroll\ndeduction. Such installments shall be in such amount as the retirement\nboard shall approve; however, they shall be at least (i) two percent of\nthe member's contract salary, and (ii) sufficient to repay the amount\nborrowed, together with interest on unpaid balances thereof within a\nperiod not in excess of five years. In the event of default such\nretirement board shall be authorized to collect such payments due from\nthe employer of such member through payroll deduction and such member\nshall forfeit all future entitlement to borrow from the retirement\nsystem until the unpaid balance of the loan outstanding at the time of\ndefault is fully paid. Such retirement board, at any time, may accept\npayments on account of any loan in addition to the installments fixed\nfor repayment thereof. All payments of principal and interest, at the\nlower of the rates set forth in either subdivision c of section six\nhundred thirteen of this article or subdivision c of this section, made\nby the member shall be credited to his or her account as principal or\ninterest. Any additional interest paid by the member shall be credited\nto the appropriate fund of the retirement system.\n c. The rate of interest payable upon loans made pursuant to this\nsection shall: (i) for members of the New York state teachers'\nretirement system, be one percent less than regular interest pursuant to\nparagraph (b) of subdivision nine of section five hundred one of the\neducation law, however in no event shall the rate be less than the rate\nset forth in subdivision c of section six hundred thirteen of this\narticle; (ii) for members of the New York city teachers' retirement\nsystem, be one percent less than the regular interest rate established\npursuant to paragraph (d) of subdivision twenty-two of section 13-501 of\nthe administrative code of the city of New York for such system, however\nin no event shall the rate be less than the rate set forth in\nsubdivision c of section six hundred thirteen of this article. Whenever\nthere is a change in the interest rate it shall be applicable to loans\nmade or renegotiated after the date of such change in the interest rate.\n d. A service charge payable upon loans made pursuant to this section\nshall be set by the retirement board in an amount sufficient to cover\nthe cost to the retirement system of administering the loans. Such\ncharge shall be paid to the retirement system when the loan is made or\nin equal installments over the period the loan is outstanding. The\namount of the service charge shall be credited to the fund from which\nadministrative expenses are paid.\n e. Each loan made pursuant to this section shall be insured against\nthe death of the member in an amount equal to the amount of the loan\noutstanding at any given time; with the exception that until thirty days\nhave elapsed after the making thereof, no part of the loans shall be\ninsured. Such insurance shall be provided by the retirement board\nthrough the retirement system. Upon the death of the member, the amount\nof insurance so payable shall be credited to his or her account. The\npremium payable by the member for such insurance shall be set by the\nretirement board at a rate not to exceed one percent of the amount\nloaned.\n Such premium shall be prorated to July first next and shall be paid to\nthe retirement system in equal installments over the period of the loan.\nThereafter, a premium not to exceed one percent per annum of the present\nvalue of the outstanding loan as of July first shall be paid in the same\nmanner each succeeding year until such loan is repaid or the member is\nretired.\n The retirement board shall, at least annually, review such premium\nrate, and may, in its discretion, increase or reduce the premium, modify\nthe terms or conditions of coverage, or discontinue the insurance of\nloans. In no event shall this subdivision impose any obligation upon\nthe retirement board to continue to insure loans of members upon the\nterms and conditions herein provided or upon any other terms or\nconditions.\n f. Such a retirement board is authorized to establish special funds as\nmay be necessary to carry out the provisions of subdivisions d and e of\nthis section.\n g. Whenever a member of such a retirement system, for whom a loan is\noutstanding, becomes entitled to the return of his or her contributions\nbecause of withdrawal from such system or because of death, the amount\nof any loan outstanding on such date including accrued interest as\nprovided in subdivision c of this section shall be construed to already\nhave been returned to such member and the refund of contributions to\nwhich he shall then be entitled shall be the net amount of such\ncontributions together with interest thereon pursuant to subdivision c\nof section six hundred thirteen of this article.\n h. Notwithstanding the provisions of subdivision b of section six\nhundred twelve of this article, whenever a member of such a retirement\nsystem, for whom a loan is outstanding, retires, the retirement\nallowance payable without optional modification shall be reduced by a\nlife annuity which is actuarially equivalent to the amount of the\noutstanding loan (all outstanding loans shall continue to accrue\ninterest charges until retirement), such life annuity being calculated\nutilizing the interest rate on thirty-year United States treasury bonds\nas of January first of the calendar year of the effective date of\nretirement and the mortality tables for options available under section\nsix hundred ten of this article. Notwithstanding the preceding sentence,\nin the case of the New York state teachers' retirement system,\ncommencing January first, two thousand four, the interest rate on ten\nyear United States treasury obligations as of January first of the\ncalendar year of the effective date of retirement shall be used.\nNotwithstanding the preceding sentence, in the case of the New York\nstate teachers' retirement system, commencing January first, two\nthousand sixteen, the average annual interest rate on ten year United\nStates treasury obligations for the days during the calendar year that\nprecedes the calendar year in which the retirement becomes effective\nshall be used.\n i. Such a retirement board is authorized to adopt such rules and\nregulations as it finds to be necessary in administering the provisions\nof this section. Anything in this section notwithstanding, the\nretirement board of the New York state teachers' retirement system is\nauthorized to adopt rules and regulations permitting a loan at any time\nprior to retirement to a member who is not in active service, provided\nsuch loan would otherwise be permitted under this section and under\napplicable provisions of the Internal Revenue Code relating to loans\nfrom pension plans.\n j. Such a retirement board shall discharge any evidence of a loan to\nmember pursuant to this subdivision upon the satisfaction of the\nobligation of the member thereunder.\n k. The retirement system shall have no right to bring suit in any\ncourt against any member to enforce the amount due under this section\nand the retirement system's sole remedy upon death, retirement or\nwithdrawal shall be to offset the amount outstanding including interest\nfrom the member's account or other benefits payable to or on behalf of\nthe member as provided in this section.\n